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Technology Stocks : Ezenia! (VSVR)

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To: Howard Herskowitz who wrote (480)	7/17/1997 2:46:00 PM
From: Steve Bunning	of 890

Impact of competition on VideoServer The point you make on the sales/earnings of VideoServer being eroded is a real concern. I think the drop in the stock price from 20 to 13 around the time PictureTel announced their MultiLink acquisition shows many investors share that same concern. Obviously, VideoServer is going to lose sales now that PictureTel can obtain units "in house". As the whole market grows, even more competitors will likely show up. VideoServer still has some things going for it. 1) The deployment of standards based conferencing equipment is increasing. The price of the conferencing equipment keeps dropping and even low-end equipment such as the INTEL Proshare supports ITU standards. This equipment will get into the hands of the real customers. PictureTel buys equipment from Videoserver, but PictureTel is not the real customer. The real customers are the ones buying end equipment from PictureTel along with the various service bureaus offering bridging services. These real customers can still choose to buy their end equipment from PictureTel and their bridges from VideoServer. 2) VideoServer is a company whose focus is their conference bridge. Other suppliers provide bridges in order to round out their product line and provide their customers with one stop shopping. The bridge is not their focus. VideoServer lives and breathes their niche which is the conference bridge. 3) VideoServer's balence sheet seems quite strong. I own VideoServer because I think the use of Videoconferencing is going to increase dramatically in the next decade and because I think VideoServer is well positioned to take advantage of any increase. I'm betting any erosion in sales will be more than offset by the growth from the expansion of the overall market. On the other hand, I would have predicted the widespread deployment of ISDN in the U.S. by 1980 ;-).

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