It seems like most of the networking stocks have followed a similar pattern. Since this is a FORE thread, I will make my comments on Xylan as they relate to FORE. If you want more detailed opinion, we should move this to the XYLN thread.
I think the big differences between FORE and XYLN are:
Technology
FORE's strength is in ATM. If ATM goes out of favor so does FORE. It doesn't matter how good ATM is, just how well received it is.
One of XYLN's key technologies is "Translational Switching". Esentially switching between topologies, rather than routing or bridging. That means that I can keep my legacy Token Ring network, and expand to Ethernet, Fast Ethernet, ATM without sacrificing throughput. Seems like somtething that many existing network managers would find practical.
Performance (Earnings, not Equipment)
FORE's worst performance was in the most recent quarter, even ignoring their legal expenses. The prior quarter was also on the downside of expectations.
XYLN missed their target 2 quarters ago, but last earnings were an upside surprise. So the trend is more positive here.
Both stocks are expected to grow dramitically in the future, and slight change from those expectations will have a severe negative effect. The P/Es of both companies are still dangerously high. When many network stocks tanked, their P/Es dropeed into the teens. Maybe COMS won't zip back into the 80s, but it won't lose half it's value again soon. Could happen to XYLN or FORE in a heartbeat.
I like XYLN as a company, and look for both long and short term gains. I see FORE more for its short term potential. The hope that the earnings (and stock price) will turn upward long enough for me to make a decent profit. I don't see it as a survivor as the company it is today.
A buyout in either case does not seem unthinkable. Where did I leave that crystal ball? |
