Hi Greg,
Since I have a long position in this company I hope you are correct in your assesments. Nevertheless since everyone is just agreeing with you let me try to come up with whatever contrarguments I can scramble.
1. New CEOs both at BAY and CS true, but House can be credited with BAY price rising from $16 to $40 in October (before Networking cos suffered 30% decline) and firming revenues, at the same time CS stock price steadily declined from $45 to $13.
2.10% labor force reduction, true but they still have about 6000 employees, not including DEC labor force. With revenue of abot $1,300 mils a year it translates into $230,000 revenue per employee. I believe CSCO has $500,000 revenue per employee. I do not know what are the numbers for BAY and other networking equipment cos, but suspect they are better then CS.
3.Your model of CS shipping best LAN/WAN equipment by the middle of the year is based on the existing info for CS, BAY and CSCO and does not take into account the R&D and aquisitions the competitors might announce.
4.DEC will provide technology significantly faster then 1Gig per sec. I think it is a bit premature even to talk about it, since the transition to 1Gig is only at the very beginning. BTW DEC invented Alpha processor, claimed to be 5 to 6 times faster then Pentium and was not able to generate any sales with it. The end of the story I am sure you know: Intel now is the new owner of Alpha and I suspect it will be shelfed for life.
5.Finally, you did not take into account the interrelations between competitors. I think when BAY was suffering CS prospered (first half of 1997) and the improvement in BAY's business (and stock prices) spelled troubles for CS.
Once again I hope you are correct and I am wrong, because I have a long position in CS. |
