I also asked why the company prefers to use stock, rather than cash, for its acquisitions. In the past Cisco has done both pooling and purchase transactions. Pooling is preferred because it doesn't carry amortization with it. Stock is preferred because Cisco's stock is excellent currency and the employees of the acquired company immediately get Cisco stock, which aligns their interests with that of shareholders. Cisco feels that the United States' technological lead over the rest of the world is partly due to the value creation that has come from pooling of interest acquisitions.
Cisco attributes much of the United States' change in corporate leadership to pooling of interests.
In short, Cisco believes that pooling has generated a positive impact on the technology economy, which accounts for a significant portion of the economic growth that has occurred in the U.S. Restricted Investments Cisco's balance sheet includes a fairly significant amount of restricted investments. Note 7 of the company's 1998 balance sheet explains the reason that this amount has been restricted. I asked why the company does this. Cisco uses off-balance sheet leasing for real estate transactions. This structure requires a certain amount of restricted cash.