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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 78.03

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Nov 14 9:30 AM EST

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To: The Phoenix who wrote (13267)	4/12/1998 8:16:00 PM
From: Lerxst	Read Replies (3) of 77399

Gary, L3 routing switches will be 1/10th the cost of traditional, legacy software based routers due to the cost reductions resulting from putting more of the forwarding path into custom asics. And, because that's where the industry is going to price this technology. Routing switches are going to be installed in the corporate data center and office riser/trunk infrastructure. WAN interfaces will be handled by other gear that is optimized for the task. Can Cisco compete in the Routing Switch product space? Anyone who thinks otherwise is a fool. Being able to compete isn't really the question. The real question is how well will Cisco manage the transition to a higher mix of lower cost, lower margin products? Imagine, if you will, Cisco going all out with Routing Switches at even one third the price of a router? What happens to their top-line revenue? If routing switches eat into any of Cisco's router revenues, than the growth rate of routing switches will have to significantly outpace that of the current routers. This strikes me as a "challenge" to Cisco's management. Regards, Lerxst

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