| To: Kenneth E. Phillipps who wrote (24380) | 4/13/1999 6:17:00 PM | | From: RetiredNow | | | |
O.K. Not to question Chambers' judgement, but why did Cisco just
purchase a company for $2 billion when its FY 98 revenues are just
$45 million. That's 44 times 12 month revenues. I know GEOC is a
great company with a great future, but doesn't the price seem
a bit excessive? I think the market must be thinking the same thing,
because Cisco stock got dinged for this acquisition, while prior
acquisitions didn't move the stock at all. Once again, great
company to have bought, but the price may have been too steep.
GEOC I/S from 10K:
(in thousands) 1998 1997 1996 1995
------- ------- ------ -------
Revenues $44,852 $18,611 $9,047 $ 1,534
Gross profit 36,379 15,027 7,336 659
------ ------ ----- -------
Net inc(loss) 9,039 6,253 754 (3,862)
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| To: RetiredNow who wrote (24381) | 4/13/1999 6:38:00 PM | | From: Kenneth E. Phillipps | | | |
mindmeld - Not sure I agree. When a company's revenues and earnings are more than doubling every year, they would seem to be "inside the tornado". Maybe this company has some kind of proprietary technology that makes it worth it. JMO.
Ken |
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| To: RetiredNow who wrote (24381) | 4/13/1999 7:54:00 PM | | From: Adam Nash | | | |
Tornado aside, the price Cisco paid has everything to do with how much they think they can do with their product line.
Maybe riding Cisco's shoulders, they will be able to deliver much, much higher sales volumes (and earnings).
Also, it's wrong to think of it as paying $2 Billion - they paid in stock dilution, whose effects are based on Cisco's current valuation which is quite high.
(And rightfully so...) |
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| To: Adam Nash who wrote (24383) | 4/13/1999 8:08:00 PM | | From: RetiredNow | | | |
True. Now you are getting into those murky waters that has Chuzzlewit up in arms most of the time. So who really paid for this company? You and me, in terms of value dilution? One thing is good, though, this acquisition will be accretive as soon as the books are consolidated.
I remember telling my sister-in-law a couple years ago to be careful about buying shares in GEOC, because they are in a space with competitors the likes of Lucent. Looks like they are now head on with Lucent.
I noticed that this is phase 5 of Cisco's strategy for converging industries. Anybody know of a link that explains what all the phases of their strategy is? |
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