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Technology Stocks : Ezenia! (VSVR)

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To: Edward F. Horst Jr. who wrote (447)	7/1/1997 7:51:00 PM
From: Brandi Alexandria	of 890

The Boston Globe had a negative article in todays business section on PCTL & VSVR. (see full story at address shown below) boston.com VSVR said problems at PCTL, one of its biggest customers, have also affected its numbers. (So much for VSVR's decreasing dependency on PCTL theory.) Analysts said both company's reports are symptomatic of market changes that include competitive and cheaper Internet-based video systems that compete with traditional systems. Translation..."traditional" means big fancy room systems = fat margins. These systems have been replaced by desktop systems and smaller, better conference room systems (lower margin products). This trend will NOT reverse itself. Mentioned that Intel is pushing a one chip solution. Also stated that the other video conferencing companies (VTEL & Sony) are not experiencing the same soft sales. One of Sony's best selling products is a conference room unit with MCU with "Hollywood Squres" for four built-in. Guess who supplies the MCU....VSVR! VTEL's desktop units are (I believe) OEM'd from ... guess who ...Intel! Intel owns a chunk of VTEL stock - I belive around 10% so they have a vested interest. I believe video over Internet has a big future, but the issue of guaranteed bandwidth hasn't been worked out to make it a competitor for short term business. VideoServer may be facing real competition from newcomer, Israel's Accord - who also has ties to VTEL. Accord sells VTEL's old MCU and is marketing their new MCU as well. VTEL will sell Accord's MCUs and helped fund some of the development I believe. I think Accord's product specialty is in the larger MCU's (i.e., telcos - VSVR's specialty) although they will probably tell you they can supply a smaller MCU as well. In spite of all the above, I still believe VSVR will rebound after the numbers are out. Their products are still the best on the market - TODAY and are basically an R & D company. I don't believe anyone can deliver a better product than they can. Cheaper maybe!

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