Price,
I think they will report revenues in line with expectations. I read the SEC filings on Zoom, Boca and Diamond, and they have all been experiencing major declines in their sales of modems, and nothing happened in this past quarter to allieviate that. I believe thet USR walked away with a big pirce of everyone else's market share, and continues to do so to this date.
I am less certain of net income numbers. Ascend claims strong RAS equipment sales. Some attribute it to strong demand for RAS products, others say it's because they are gaining market share. We won't know which is true until both companies report, and maybe not even then if they don't disclose it. USR has been spending a lot of bucks on marketing, but should have made up for it in increased revenues. Unlike their Rockwell based competitors, they did not have much if any problems with obsolete channel inventory, since they have been producing upgradeable modems since August.
On a slight tangent, I wonder what percentage of revenues and gross profit comes from the sale of modem cards for RA servers. Since 100% of USR RAS modem cards are software upgradeable, their modem card sales are not affected by the advent of 56k, except as demand for new ports comes about. On the other hand, most of the modem cards in Ascend RAS boxes have to be replaced to achieve 56k. While that creates demand for new cards, there will be a lot of pressure placed on the Ascend and Rockwell to cut their margins in order to try and catch up with deployment of x2. Also, it will create a glut of 28.8/33.6 modem cards on the secondary market, eliminating any potential sale of new cards based on the pre-56k technology.
Back to the original question, there was probably very little gross profit generated from x2 software sales in this quarter, but that will escalate quickly as users and ISPs upgrade their systems in the coming weeks and months. Most of the upgrades date have probably been free or modestly priced, generating little windfall. However, that will undoubtedly improve from here forward. Further, USR will benefit in bottom line dollars as the likes of Cardinal, Cirrus, and Hayes sell x2 based products and pay royalties to USR. |
