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[Ulisses Pereira]

"With No Surprises, Cisco Stagnates"

By James J. Cramer
RealMoney Columnist
5/12/2004 8:15 AM EDT

"Cisco Systems (CSCO:Nasdaq - commentary - research) is the perfect stock -- too perfect, in fact. There isn't anything we don't know about it, from the earnings it will make -- within a penny -- to the percentage growth rate, to the 100th basis point, to the intonation of John Chambers when he discusses the low, medium and high ends.

Nothing isn't known.


So, given how perfect it is, the stock becomes almost impossible to move, particularly at junctures that typically move stocks -- junctures like earnings. When you have a perfect stock that everyone knows everything about, it is asking too much to have folks pay a higher multiple for such perfection. If you hear everything you expected to hear, why the heck would you pay 32 times earnings instead of the current 30 times earnings? Because you liked the way John Chambers waxed eloquent about Ericsson (ERICY:Nasdaq ADR - commentary - research)?

Of course, when we get such perfection, we want to pay a premium for it. And we do. Cisco is not cheap. It's like EMC (EMC:NYSE - commentary - research), for heaven's sake, another stock selling at a high multiple -- except that EMC is growing faster.

So, today people throw up their hands and say, "Why isn't Cisco moving up?" And I say they're asking the wrong question. The real question is how can a stock that gives perfect information surprise people enough to get it to go up? How can you rally a stock on information everyone expects, right down to the better-than-expected earnings news?

You can't.

Cisco is in a position analogous to the home football team that wins by 3 points; the problem is that they gave the underdog 4.

Cisco wins, but it doesn't cover.

So, and here's some irony, if you are short it, you don't need to cover! "

(in www.realmoney.com)