Rich, you know it's easy for companies to manipulate earnings to meet targets. Look deeper at Cisco Systems'
Sure, reported net earnings per diluted share skyrocketed 40%. Operating cash flow (a truer measure of corporate health), however, gained an anemic 8.5%. Slower than revenue growth, which indicates that those new dollars were tougher to earn. That's no picture of strength. Oil giant ExxonMobil
At the same time, management forecasts 10-12% revenue growth for this fiscal year. That's a deceleration from last year's 12.5%. While 10-12% is not bad, it's just another indication of Cisco's status as a maturing, cyclical company.
Also, while Cisco's cash hoard is nice, cash is a dangerous and expensive asset to hold. It's dangerous because it needs to be deployed intelligently in order to be useful. Poorly deployed cash directly costs shareholders money -- reference Cisco's own $9 billion equity lost from its options and buyback program.
Cash is expensive because, currently, cash earns just over 3% in an ING
Likewise, I trust Warren Buffett, but Berkshire Hathaway's
Bottom line: There are more shareholder-friendly companies trading at more attractive valuations elsewhere, so my money is staying away from Cisco.
You're not done. This is just one part of a four-part Duel! Don't miss Chuck's original bear argument or Rich's bullish argument and rebuttal. When you're done, you're still not done. You can vote and let us know who you think won this Duel.
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