The 5-Year Outlook for This Dow Stock: Cisco

By John Reeves | More Articles
January 26, 2012 | Comments (2)

The following video is part of our "Motley Fool Conversations" series, in which analyst John Reeves and advisor David Meier discuss topics across the investing world.

In our ongoing series about Dow stocks, Dave looks at the prospects of Cisco over the next five years or so. He takes a particularly close look at the recent performance of the stock and then offers his longer-term outlook. The video closes with Dave's five-year prediction on Cisco.

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Report this Comment On January 26, 2012, at 6:33 PM, BradReeseCom wrote:

Hi John,
What's your take on Cisco's net realizable cash being lower in FY11 than it was 10-years ago in FY02?
http://www.bradreese.com/images/cisco-capital-structure-fy11...
And while Cisco's net realizable cash is lower than it was 10-years ago, Cisco also has $15 billion more in debt than it had 10-years ago too.
I mean, don't you find that to be a red flag?
It appears to me that Cisco has been artificially inflating its net income over the past 6 years:
http://www.bloomberg.com/news/2011-06-28/biggest-tax-avoider...
Cisco CEO John Chambers has bet the farm that Cisco's tax dodging ability will continue indefinitely.
Brazil on the other hand appears to have caught on to Cisco's tax dodging according to Cisco's most recent form 10-Q filed with the U.S. Securities and Exchange Commission (page 59):
http://www.sec.gov/Archives/edgar/data/858877/00011931251131...
"The total asserted claims by Brazilian state and federal tax authorities aggregated to approximately $483 million for the alleged evasion of import taxes, approximately $929 million for interest, and approximately $2.2 billion for various penalties, all determined using an exchange rate as of October 29, 2011."
That adds up to a robust Brazilian tax penalty of $3.612 billion.
Sincerely,
Brad Reese
Report this Comment On January 27, 2012, at 8:01 AM, TMFHumbleServant wrote:

Hi Brad - It looks like the difference between NRC over the time you mentioned in $18B to $15B. Even with that and the increase in debt in debt over time, it doesn't look like Cisco is in danger of not being able to service that debt.
With regard to inflated earnings, I think it's better to focus on the cash flows, which are significantly ahead of earnings, even after adjusting for stock-based compensation.
In my experience, lawsuits are hard to handicap as an outsider. So I don't really know if Cisco has been "caught" yet.
Thanks for the questions.
Dave

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