A few observations:
1. While they are an excellent company, Nortel has had 90% share of the SONET OC-192 space because there were only two companies delivering product and the other was Fujitsu. Lucent has had 0% share of the SONET OC-192 market because, until about 3 months ago, they were not shipping OC-192 product. Qtera is not about expanding NT's share from 90% to 95%, but protecting NT's position with the new build fiber companies. Even so, how many city pairs on fiber networks are 4000Km apart, particularly given soleton technology AFAIK isn't yet ready for submarine systems? Eventually, when all-optical switching becomes a reality these long distances without regeneration will have significant value, but most of that is in the future. $3.25B is alot to pay for Qtera IMHO
2. Cisco is fairly analogous to IBM, circa 1975 (which by the way was a fabulous investment for the times). It can continue extremely strong growth for a long time on the back of its core LAN switching and router franchises. Check the Dell'oro numbers - the 3600, 2600, Cat6000, Cat8500, 7500, and GSR12000 products are responsible for 70% of the company's growth. Of course 100% of the 3600, 2600, 7500 and 12000 revenues are considered carrier revenue in Cisco's scheme, pushing it quite far IMHO. While telecomguy's dreary assessment of Cisco's position with carriers is more accurate than not, for the next couple years, it doesn't matter - Cisco's core business is that strong, and now that it has IBM and the DOJ's blessing to change out every FEP on earth with an SNA/IP enabled 7200, it has an engine to keep it going for sometime. This buys Cisco time to get some penetration in the carrier space - don't fool yourself, Cisco is viewed as a router specialist with some interesting access products by most carriers - hence the enormous investments in people (raising op exp from 34% to 37%) and technology ($7.4B for Cerent/Monterey). Despite Cisco's deep management team, it is no slam dunk that Cisco succeeds here. Cisco probably has about a year's grace period before the street starts asking questions about Cisco's participation in defining telecommunications carrier networks.
3. As for the future of NT,CSCO and LU stock, I think expectations for NT are a little over exuberent, CSCO will appreciate about in line with its 30% EPS growth and LU has alot of room for multiple expansion once we get past this quarter. Time will tell.
4. As for cheerleading on the NT,CSCO and LU boards, I would say the NT thread is the most open to discussion. CSCO and LU are about even (Mighty Mizzou = Zoltan!). NN and QCOM are way, way worse. |
