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Technology Stocks : Compaq
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To: Gary Korn who wrote (9810)12/1/1997 7:00:00 AM
From: Joseph Pareti   of 97611
 
>Those on this thread might want to check
>the CPQ news
>stories I've posted on the ASND thread
>(they are listed in my
>profile, generally as
>CPQ/Networking article #1, etc.)

Some of this articles suggest to me that the might of CSCO
remains to a great extent unchallenged :

-CPQ is obviously serious about grabbing a chunk of the
networking business (Microcom acquisition, Alan Lutz
reporting to EP, the need for a revenue source growing
faster than their core growth rate of 15% to get them
to the $40B goal )

-yet their channel has to be transformed from the "box pushers'
mentality" to one of system integration. John Chambers
observed that "CPQ sees 50% margins
(in the networking segment)
and thinks it's died and gone to heaven.
So it will come into this business.
But they will reach the point
where they will have troubles either distributing or
supporting or consulting"

-furthermore this is not an easy entry/exit (as the printer
business).

-CSCO gross profit margins still hoover around 65%
[ similar to ASND before 3Q97 went bust :-( ]

-3com who are betting their strategy on the 'edge device'
face (i) the might of intc and (ii) intc+CPQ "burgers and fries",
but what's most IMO, they face skepticism from customers
who believe an NIC costing 50 bucks should just "keep
working all the time". Currently they seem to be
"firmly entrenched " in a lower margin segment, and this
has been further reinforced with the USRX acquisition.


Again I'd love to be proven wrong
as I chose to invest in the challengers.
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