Briefing.com summaries of H&Q presentations by networkers
Ascend Communications
Although well attended, this presentation didn't give much new information. Dominated by
a Q&A format from one of the H&Q analysts, the questions seemed like softballs, and the
answers were vague. A big disappointment for many managers and for us. Interviews on
CNBC are tougher than this one. The only items of interest to come out were the
statements that Lucent is a "strong competitor" in the low end for them and Cisco is a
strong difficult competitor in dial-in products. A new product coming down the line is
"voice-over" capability for their existing ISP customers. This means Internet Service
Providers can add on to existing Ascend products and bring voice-over-the-Internet
capability directly to the end-user. This exciting prospect may mean you can talk over the
internet with your PC microphone and speakers as part of your normal Internet access
service sooner than you think.
3COM
A broad overview of 3Com's product line, probably already known by anyone who owns
3Com. From a technical point of view, 3Com stated that the coming transition from a
"Store-and-Forward" technology to a "direct move" technology will benefit 3Com more
than other competitors. The elimination of s&f technology should help increase bandwidth
on the Internet. We haven't done enough research to know if 3Com's claim to have a lead
here is accurate, but we will keep it in mind. From a financial perspective, 3Com gave as
this years goal an operating profit margin of 16-20%. However, last quarter's was only
1.3%, so they have a long way to go. To meet this goal they have to drive the gross margin
up to 47% from current 43%, and drive operating expenses down to 27% from 42%. For
those of you unfamiliar with financial statistics, this would be an incredible feat if
accomplished in only one year. It is likely we weren't they only skeptics in the audience on
this statement.
Bay Networks
Talk about dull. This sparsely attended presentation lost everyone on slide three as the
differences between L3 and L2 networks were elaborately explained. Granted, the
presentation was at 5:00, but we saw more nodding heads than at some of the 7:30 am
presentations. One particularly curious comment was the statement by Gary Vacon that
the network market is "maturing" and as such, the need for optimizing products is getting
stronger. Therefore Bay Networks is focusing on products for optimizing IP performance.
Bay Networks may see the market as maturing, but we don't think Cisco would view it
that way. After all, Cisco's growth curve is still rising sharply, not the definition of a mature
market at all. Cisco was not invited to the conference.
PairGain
Sparsely attended, dull presentation. With declining margins, managers interest seems to
be waning. Although a leader in installed T1 lines, PairGain also has 700K DSL lines
installed. As such, it is not valued as an ADSL play, apparently since the success of one
business hurts the other. In any event, we were surprised at how little interest was shown
by the attendees in this once hot stock. When the bloom is off the rose, it shows.
|
