Technology StocksCisco Systems, Inc. (CSCO)

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To: Jimbo who wrote (21813)2/3/1999 6:35:00 PM
From: Dan Spillane
   of 77336
Buy low, sell high...if you plan on selling. The relative valuation of this stock is so high it doesn't make sense to buy even if you plan on holding for a long time.

...very much like IBM recently...sure the story is good, but not infinitely.

You said:
re Why buy it now ? Because it's going to get even better !

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To: Frank Povoski who wrote (21904)2/3/1999 6:36:00 PM
From: Tim Luke
   of 77336

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To: William F. Wager, Jr. who wrote (21896)2/3/1999 6:38:00 PM
From: Zoltan!
   of 77336
Cisco Systems Inc. Dow Jones Newswires -- February 3, 1999

Concerned About Corp. Mkt, Cisco Backs Away From Stk Split

By Joelle Tessler
NEW YORK (Dow Jones)--While investors were quite pleased with Cisco Systems Inc.'s (CSCO) solid second-quarter results Tuesday, some were disappointed that the company didn't also split its stock.
With Cisco's shares trading well above $100 - they hit a new 52-week high of 117 7/8 earlier - many investors believe the stock is ripe for a split.
But analysts say the company's decision not to declare one now likely reflects its concern that the pricing pressure and slowing growth facing the entire enterprise networking market could put pressure on Cisco's stock.
True to form, Cisco beat Wall Street's consensus estimate for its fiscal second quarter, ended last month, by a penny, earning 36 cents a diluted share on $2.83 billion in revenue. That compares with 29 cents a share, adjusted for a 3-for-2 stock split in September, on $2.02 billion in revenue in the second quarter of last year.
Cisco is already the largest supplier of networking equipment to the enterprise, or corporate, market. And the company has been quickly expanding its presence in the fast-growing carrier market, which is made up of telephone companies and Internet service providers.
The company said bookings in its service provider business unit rose more than 50% from year-ago levels, driven by strong sales of dial access products in particular. Lazard Freres analyst Michael Duran expects the Cisco's service provider business to grow to be the company's largest unit within two years.
Cisco's enterprise business unit, meanwhile, grew 30% year-over-year in the latest quarter. But even while Cisco continues to dominate this business - in part by capturing market share from its competitors - the company warned that the entire enterprise market could be in for a bumpy ride in 1999.

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To: Frank Povoski who wrote (21900)2/3/1999 6:40:00 PM
From: kennny
   of 77336
Sutro is full of s--t !
What reason would Sutro have for a downgrade? More than likely, they want to push a different stock. CSCO is owned by many. It is for the most part a very safe stock that has a VERY proven history. Who would even hint that the future for CSCO can be anything but up. Look at what they have done and what they will be doing. This is one of the few stocks that there are out there that doesnt need "HYPE".
As for grading....I watch Moneyline, if for nothing else, to hear the hype the brokers give. For weeks every broker that they have on has said that AMZN is overpriced and all the B.S. about internet stocks and so on and so on. Then about a week ago they get some young guy on there who is saying how AMZN is the deal of a life time....
My point is that just about every upgrade or downgrade is not only based on the correct info. Rather what they want you to buy. (hype)
How many gradings have you seen that are total B.S. ? Have you ever heard of anyone being sued for giving a bad grading?
Most of these guys don't know the difference between a hot dog and a door knob. But they want to tell you what to do with your $$$ because they really care about your investments, right ?
Good luck to all

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To: Frank Povoski who wrote (21904)2/3/1999 6:53:00 PM
From: Josef Svejk
   of 77336
Humbly report, All, Strong Growth at Cisco:

Regarding upgrades/downgrades:!downgrades.htm



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To: kennny who wrote (21908)2/3/1999 7:44:00 PM
From: yard_man
   of 77336
Maybe because half it's earnings are almost always fictional. Every time they acquire someone they write off most of the purchase price. as long as they are good at making the acquisitions -- and CSCO is very good at making acquisitions -- revenues mean profits.

0.17 cents (almost all of the 0.19 acquisition cost) of this quarters earnings -- about one half are simply accounting. SEC is going to get after this stuff -- probably won't get around to CSCO for a while, but maybe this analyst is starting to get it ...

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To: Toni1001 who wrote ()2/3/1999 7:47:00 PM
From: yard_man
   of 77336
40 bucks isn't bad for a dozen ...

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To: yard_man who wrote (21910)2/3/1999 8:03:00 PM
From: JC Reddy
   of 77336
I have been wondering about it myself, especially in the case of CSCO since CSCO beats estimates exactly by a cent or so very consistently. May be they are very good at directing analysts, or may be they tweak their financials to meet the whisper numbers - I don't know.

I don't know much about accounting. I have a few questions:

(1) Do companies use "write-offs" to meet the expectations? How does one determine how much to write-off? Are there precise rules or can companies do whatever they wish?

(2) I also noticed that the media is inconsistent in reporting the financial results. Sometimes, they report "before-the-write-off" results and sometimes "after-the-write-off" results. CSCO is always the latter. Why is that? In the case of CSCO, the difference is huge! 19 cents out of 36 cents of EPS!

(3) Not related to accounting... How much is the organic growth of CSCO excluding acquisitions (both revenue and earnings)?

Thanks for your input.

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To: JC Reddy who wrote (21912)2/3/1999 8:43:00 PM
From: Mark Peterson CPA
   of 77336
I have a theory about the way earnings are managed. With little more than an Excel spreadsheet, you too can manage earnings so you exceed analysts expectations by $.01 each quarter. Here's how it's done.

The liability section of the balance sheet includes an account called accrued liabilities. That general caption may include separate accounts for over dozens of different accrued liability accounts: accrued warranty expense, accrued vacation pay, accrued bonuses, accrued pension liabilities, accrued legal fees, accrued income taxes, accrued relocation expenses, etc. etc. You get the picture.

An accrual account, unlike an account payable balance, is an "estimate". Based on facts and circumstances, as well as preferences for meeting or beating street expectations, estimates for various accrued balances can be finagled up or down depending on the amount of earnings you wish to....go away.

So, if during the first cut through your preliminary financial statements, you notice, "Well, if we report these numbers, we're going to beat analysts expectations by $.15 per share. That's good because we look to our shareholders like we're doing our job. But that's bad for us because a year from now, we've set an awfully high bar for us to hurdle on a quarter to quarter comparison. So, you do what all good controllers and CFO's never acknowledge doing: you rejigger the amount of dollars you can pack into the accrued liability accounts so you beat estimates by a penny without causing your outside auditors to blush.

To be sure, IMO, the auditors are in on this too. Although I couldn't say for sure, the audit fees for CSCO are likely more than a little north of $1M per year. That's a substantial amount of fees that would be difficult to replace, so you play the game with your client, knowing you get to keep the audit engagement, and that in the long-term, you didn't hurt anybody because your accrual "estimates" will change, for better or for worse.

In the quarters where you are shy of analyst expectations, you simply pull some of those dollars out of the accrued liability accounts, effectively reducing expenses and increasing earnings per share so you can at least meet, if not beat analyst expectations.

It is a game, to be sure, that appears to be played if not successfully managed by many notable corporations of size. Of course this is all IMO and there may really be one or two companies out there that actually beat expectations by the $.01 per share without all of these machinations.

But personally, I doubt it.

Mark A. Peterson

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To: JC Reddy who wrote (21912)2/3/1999 8:48:00 PM
From: yard_man
   of 77336
Gosh JC -- that's a research project, but I'm interested in the acquisition stuff and R & D writeoffs. Go to and Fleckenstein has an analysis there which tries to guage earnings growth taking into account R & D writeoffs ...

I have no clue as to whether or not it is correct. When I get a chance I may fiddle with the quarterly statements and just see what the trend is -- all I know is LU and CSCO, these two market darlings, seem to have it down to a science ...

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