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Technology Stocks : Cisco

CSCO 71.08

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Nov 7 9:30 AM EST

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To: Zoltan! who wrote (102)	7/28/2000 4:32:10 PM
From: The Phoenix	Read Replies (1) of 405

A fundamental yet personal snapshot for discussion... - NT and optics versus Cisco at the edge. Customers (end users that purchase services from carriers) have traditionally purchased bandwidht. Increasingly however customers want SLA's, services, and flexible tools to use their network services. In fact users continue to purchase more services (which require unlerlying bandwidth) than ever. So, the question is is it bandwidth they are buying or is it services. And if it's services is selling bandwidth where to be? It's my view that optical networks are a key ingredient to delivery of services. Today there is a finite capacity in fab plants to deliver optical components (DFB's, modulators, trancievers, etc.). Nortel has done a great job at cornering supply especially at 10G and they want to hold onto this advantage in order to freeze out competition. HOwever start-up's continue to come on line with lower cost components and fab plants continue to bring more capacity on line. As this occurs prices erode as do margins. Furthermore the intelligence required to manage/provision optical backbones is nominal in comparison to delivery of services across edge networks. The fact is lamda provisioning will likely become a function of edge switches going forward relagating optical backbones to big dumb pipes. This all said optics is where it's at and optical companies are benfiting from unusal demand and tight supply. Nortel is a benefactor of this. Going forward however it will be (IMO) those companies that deliver network intelligence and services to carriers and susequently their customers that will benefit the most and for the longest period of time. I believe that's the sweet spot Cisco sits in. SO while NT is benefitting short term from this rush for optics (and I own NT for this reason), long term Cisco and IP on optics will win out. OG

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