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Cisco: Getting a Slap in the Face

Nothing is safe. Microsoft got whacked. Now, Cisco is being whacked. Is there any place to hide in this market?

The fact is that, for the most part, we have suffered through a bear market in the NASDAQ. There has been much damage to investors' psyches, and of course, investors' pocketbooks. It will definitely take time for the markets to mend its wounds.

But if you have a long-term perspective (at least one year), the current market environment presents great opportunities. One company that should be on your radar screen is Cisco .

With Cisco, investors have been spoiled. Basically, it never misses its numbers. In a market that is risk-averse, this is a great antidote. But apparently, it's not enough.

Ok. Let's take a look at what happened yesterday. It was a no brainer; Cisco beat its numbers by one penny. The net earnings last quarter were $1.03 billion or 14 cents per share (this is the first time the company has earned over $1 billion in a quarter). Revenues were $4.92 billion, which was an impressive 55 percent increase (estimates called for $4.67 billion). Gross profit margins were 64.5% and net margins were 20.9%.

As has been a custom, Barron's has been lashing out at Net stocks, of which latest was Cisco. The Barron's article raised questions about the quality of earnings. True, earnings-per-share are often misleading. However, there is something that cannot be denied: Cisco is a cash machine. In the past quarter, the company was generating $500 million in cash per month. In all, the company has $16.2 billion in the bank account.

Another major concern about Cisco has been its feverish acquisitions pace. It seems that the company will pay any price for a hot start-up, the most recent one being ArrowPoint Communications ($5.7 billion). While the price tags are high, Cisco certainly has proven it knows how to quickly integrate an acquisition, as well as heavily monetize the technology. It is this strategy that has allowed the company to continue its growth rate and remain competitive.

Cisco is a company that practices what it preaches. Net technologies pervade the organization. The company is so intensely wired that the company's books are tallied daily. No other company of its size can come close to this.

Obviously, the use of Net technologies has turned Cisco into one of the wealthiest company's on the planet. It is the envy of corporate America, who want to do the same things with their own companies. Of course, Cisco will be there to sell the necessary tools. If you have time to hold onto this stock, the recent dip looks like an opportunity.