A: You can be confident that the dominant corporate networking company will in the long run benefit from the dramatic worldwide growth in telecommunications.
Its roughly $7 billion acquisition of Scientific-Atlanta Inc., a large maker of cable television set-top boxes, has been a boost to sales.
Yet that doesn't mean the short run will be easy for shareholders or that industrywide volatility and fierce competition will disappear. Sales in its two main businesses have slowed and the digesting of Scientific-Atlanta is a huge task.
Shares of Cisco Systems (CSCO) are up 2 percent this year following declines of 11 percent last year and 20 percent in 2004. Shares are down more than 75 percent from their March 2000 high.
The company frequently repurchases its shares.
A recent speed bump for the stock was a research group's critique of its much-touted, high-speed Application Control Engine, known as ACE, which provides greater control over applications and business services. The 451 Group thought the price too hefty and felt the new product added confusion to the existing product line.
Net income slipped slightly in the most recent quarter as stock-option expenses cut into profits from an 18 percent sales gain. The firm has lately been cautious in earnings projections, which has disappointed Wall Street. Though it has been criticized for its substantial use of stock options as compensation, Cisco is in good financial shape.
Chief Executive John Chambers, 56, is adding the title of chairman but giving up his president title, so the naming of a new president could signal who his eventual successor will be.
The consensus analyst rating on shares of Cisco is a "buy," according to Thomson Financial, consisting of 11 "strong buys," 16 "buys," seven "holds" and one "sell." The main problem is that investors who once regularly expected 15 percent annual earnings gains must be content with a company that isn't growing as fast as it once was.
Cisco recently agreed to acquire Meetinghouse Data Communications Inc. for $43.7 million. It also completed its acquisition of privately held Metreos Corp. and Audium Corp., which will aid in building customized unified communications applications.
Earnings are expected to rise 15 percent in 2006 versus 18 percent projected for the networking and communication devices industry. The five-year annualized growth rate forecast is for 15 percent, which is in line with its peers.
Q: Please tell me what the future may hold for my shares of Janus Olympus Fund. -- R.C., via the Internet
A: It's a brand-new ballgame now that Claire Young, the fund's portfolio manager since 1997, has retired. The Janus board intends to merge Janus Olympus Fund (JAOLX) into the better-performing Janus Orion Fund (JORNX), likely in late October.
Ron Sachs, the Orion manager now in charge of both funds, will manage the combined fund. He has a fine track record and isn't as aggressive as Young, preferring to emphasize valuations and not pay too much to buy growth stocks.
The $2.2 billion Janus Olympus Fund is flat over the past 12 months to rank in the top half of large growth funds. Its three-year annualized return of 9 percent puts it in the top one-fifth of its peers.
"Because it's not easy to find a specific slot for Janus Olympus, it works best in a supporting role in a portfolio," said Dan McNeela, analyst with Morningstar Inc. in Chicago. "It runs a pretty concentrated portfolio, which is likely to become even more concentrated under Sachs, so there probably won't be a lot of stock overlap with other investments."
Nearly one-fourth of the fund's assets are in health care, with consumer services, financial services and technology hardware other significant concentrations. Its top holdings recently were Celgene, Yahoo, Whole Foods Market, Roche Holding, SAP, Teva Pharmaceutical Industries, SanDisk, Four Seasons Hotels, Potash and United Parcel Service.
This "no-load" (no sales charge) fund has an annual expense ratio of 0.96 percent. It is closed to new investors.
The Janus fund family paid $226 million in restitution, penalties and fee reductions in 2004 to resolve allegations that it permitted market-timing in its funds by a dozen clients. Its new leaders have refocused the firm on its investment process and away from the marketing and sales emphasis of the past, Morningstar believes. John Bluher, with more than 20 years of experience, including work at the Securities and Exchange Commission, became general counsel at Janus Capital Group in 2004.
Q: I see all kinds of share classes for mutual funds and really don't understand any of them. Can you explain? -- D.R., via the Internet
A: Investors do encounter an alphabet soup of letters and types of shares that vary from firm to firm. The most common three share classes--A, B and C--are defined by their sales charges:
-- Class A shares have a front-end "load," or sales charge.
-- Class B shares have "back-end" or "deferred" loads that gradually decline over time. That means the longer you own the fund, the smaller the sales charge will be when you sell. B shares usually convert to A shares after five to seven years.
-- Class C shares have a "level load," which means an ongoing fee.
"No-load" funds have no initial sales charge. The Class A and no-load choices have been around the longest. In the late 1980s, the Securities and Exchange Commission granted permission to offer other share classes.
"What's best for you depends on how much you wish to invest and how long you intend to hold the investment," said Chris Wloszczyna of the Investment Company Institute in Washington, D.C. "You must do the math to figure which share class gives the best deal for your circumstances.
Andrew Leckey is a Tribune Media Services columnist. E-mail him at email@example.com.