Dow Jones 10499.03 -6.15 9:05 am PST, February 4, 2004  NASDAQ 2036.32 -29.89 For info, visit access.smallcapnetwork.com S & P 500 1131.27 -4.76 To be removed, please click here Russell 2000 571.70 -7.45 VOLUME 04: ISSUE 8  Feature: CSCO - The Sky is Falling. Whatever. Apparently, the sky is falling, courtesy of Cisco Systems (NASDAQ: CSCO). Oh, please... The California-based tech behemoth reported earnings and gave guidance that displeased the intelligentsia, so down we all go we're told. I smell opportunity, and soon. NOTE: Keep an eye on your inbox, Friday. We are going to profile a very nifty manufacturing company with tentacles in the Police/ Fire/Safety and Homeland Security markets. We believe that this company has a great future and the right products to profit significantly from the rise in national security spending. A year ago, Cisco was trading at under $15. As of the open, Wednesday, the shares had weakened from $26 to under $24.75. That means that folks who took the risk early in 2003 are still up almost 100 percent. Sell some? Sure. Sell the market? I think not. CNBC has made the trivial travails of CSCO its mantra today. As usual, it replaced journalism with knee jerk and reactionary reporting. And will likely keep CSCO front and center--at least until the next 'catastrophe' comes along. You be the Judge... Cisco reported earnings of 10 cents a share due to an accounting charge for its second quarter (as at December 31). Otherwise the number would have been 18 cents. Analysts wanted 17 cents. Sales were $5.4 billion, up 15 percent over the same period 2003. Analysts wanted $5.29 billion. This makes the seventh consecutive quarter Cisco has reported sales in excess of $1 billion. Although Cisco effectively beat expectations, CEO John Chambers made a statement that mentioned that CEO's were still cautious about spending and hiring. Inflammatory? Market correcting? Merely seems a responsible observation by my read. I'd rather have my CEO cautious than espousing unrealistic expectations. And for this the media and Wall Street spanks the stock and, by extension, the rest of the market? Unbelievable. Have we learned anything? Big cap investors could learn a lot from their smallcap brethren--patience, for one thing and, not to sound too ecclesiastical, a bit of faith. Those of us who watch the small cap market learn to take bad news in stride against the larger backdrop that will see a small company prosper through proper management and old-fashioned moxie. They stumble periodically on the path to success, which, may or may not be reflected, short-term, in the share price. Large caps, it seems, are not afforded the same courtesy; any 'bad news' is judged instantly and harshly with no eye to the big picture. It's darned  annoying. Would I buy Cisco here? Probably not, mainly because it isn't one I follow intently. That said, I could read its tea leaves just fine. Taking it out to the woodshed based on yesterday's news is simply an over-reaction. And trying to spin it as a negative market mover is nothing short of ludicrous. Remember: these are the same folks--analysts and media--who continually bring us a lukewarm reception for gains in the likes of Nortel, Lucent and Sun Micro. Pay attention, sure. But one quarter in one stock does not a market disaster make. Projections project more of the same. Earnings projections for CSCO vary slightly depending on where you look. For 2004 (as at July 31) and 2005 the numbers seem to percolate around 65 cents and 75 cents respectively. At $24.75, the shares throw off future price earnings of 38 times and 33 times. What that does tell me is that the shares may well have gotten a bit ahead of themselves from a valuation standpoint. Is it a catastrophe? The beginning of the end? Hardly. But I would be inclined to look elsewhere. And I would have said that before yesterday's earning's announcement.  The fortunes of large cap stocks are primarily a matter of perception and, unfortunately, general consensus. Short-term Cisco's shares will probably weaken a bit, but more because of an enthusiastic pre-existing valuation than any material developments. The market will quickly slough off Cisco's 'bad news'. As a matter of fact, it already has.   We Value Your Feedback Got comments, questions or suggestions? Send 'em on over: Editor@smallcapnetwork.com If you wish to send a written request or inquiry, please send it to our physical address: TGR Group, LLC 3525 Del Mar Heights Rd #334 San Diego, CA 92130 Unsubscribe Here D I S C L A I M E R : The SmallCap Digest is an independent electronic publication committed to providing our readers with factual information on selected  publicly traded companies. SmallCap Digest is not a registered investment advisor or broker-dealer. 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