Dennis, I found the article quite interesting. On the one hand, Cisco has fictitious profits. On the other hand, is squeezing a hell of a lot out of the telecom companies.
At the same time, in economics classrooms across the country, students are learning that prices offer an accurate signal to all the agents in the economy.
On Sat, Mar 10, 2001 at 02:28:27PM -0800, Dennis Robert Redmond wrote:
>
> Because it makes your balance sheet look stronger than it really is: you
> book potential earnings as something real. The crude example is Intel's
> 2000 profit margins, for example, padded by $1 billion when it sold off
> its holdings of Micron. But firms like Cisco have turned stock pooling
> into an art form; Graham Lea had a good writeup of this at
> <http://www.theregister.co.uk/content/archive/14016.html>, where he wrote:
> "The company's acquisitions are mostly by pooling, which results in
> distorted accounts. It also has enormous stock-option debt, and customers'
> purchases are financed via related party transactions. So long as Cisco is
> on the up, this works, but it's a precarious edifice that stands in peril
> if the company were to fail to meet financial analysts' expectations."
> Cisco just announced its axing 15% of its workforce, so we're about to
> find out just how precarious that edifice really is.
>
> -- Dennis
>
-- Michael Perelman Economics Department California State University Chico, CA 95929
Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu