A related news in the videoconferencing industry. VSVR appears overdone and may poise for a rebound. Separately, VTEL reported after the bell and on paper it beats estimate by 600% (7 cents vs 1 cent est.)! However, after closely reading the news release, it appears that the company changing its reporting period and creative accounting could have accounted for some of the nice gain. There may be a pop tomorrow but I would be cautious. Nonetheless, I think the news is beginning to come out that videoconferencing is the next big technology wave with revenue growth of at least 30% annually (some estimated as high as 50%) well into the next century. PCTL could very well be the Cisco or Intel of next few years with its market leadership (>50% share at the moment).
Videoserver Stk Dn 8% In Wake Of Picturetel Analyst Meeting
By Marlon Millner
NEW YORK (Dow Jones)--Image is everything. And jockeying for position in
the video conferencing arena - the business of delivering and connecting
video images to offices around the globe - has apparently sent shares of
Videoserver Inc. (VSVR) lower for a second consecutive day.
Shares suffered back-to-back 11% declines, following an analyst meeting
held by Picturetel Corp. (PCTL) yesterday, analysts said.
Picturetel, Videoserver's largest client, told analysts in a meeting
that it is strengthening its alliance with 3Com Corp. (COMS), and may be
entering a relationship with U.S. Robotics Corp. (USRX), analysts said.
The prospect of a stronger Picturetel-3Com relationship was rumored as
an ominous sign for Videoserver's alliance with Picturetel.
Videoserver, of Burlington, Mass., makes multipoint conferencing tools,
that Picturetel, of Andover, Mass., bundles with its servers.
Picturetel's announcement to analysts follows Videoserver's announcement
two weeks ago that the company and Cisco Systems Inc. (CSCO) are jointly
offering easy connectivity of existing and new conferencing solutions.
At least one analyst speculated that since 3Com and Cisco Systems are
arch-competitors, that Picturetel tried to one-up Videoserver's new
deal.
Laidlaw Equities Inc. analyst Youssef Squali said Cisco can take
Videoserver's technology and put it in the networking company's
products. He speculated that this might be seen hurting Picturetel,
which provides videoconferencing software, in the local-area and
wide-area networks market.
''The idea was 'My God' if Cisco is getting together with Videoserver,
then Picturetel is locked out of that market.''
Given Picturetel's strategy, investors may believe that the company's
strengthened alliances will be potentially damaging to Videoserver,
Squali said.
Currently, the vast majority of video conferencing is done through
digital telephony lines, said Oppenheimer & Co. analyst Randy Yuen.
Videoserver's recent pact with Cisco Systems applies to the emerging
market of intranetworks and the Internet.
But the alliances with computer networking companies grow out of both
Videoserver and Picturetel developing gateways to using intranets and
the Internet and potentially competing head-to-head. And the rumor of a
damaged relationship ''doesn't have any truth to it,'' Squali maintained
''I talked to both companies (and) both are very confident of their
mutual relationship.''
And Yuen said the market overreacted to the news.
''Yesterday's movement was overdone and today, it's getting into the
room of ridiculous,'' said Yuen.
He maintains that the new relationships make the companies ''competitors
in a very, very small sector, but people don't quite understand that,
and Videoserver's stock is getting pummeled.''
Picturel will continue to bundle Videoserver's products, Yuen said,
adding that Picturetel expressed possible interest in reselling a
Videoserver gateway as well.
Videoserver and Picturetel officials weren't immediately available for
comment.
Videoserver shares fell 5 to 42 1/2 on Nasdaq volume of 1.3 million.
Average daily volume is 282,400.
Yesterday, shares declined 5 5/8 to 47 1/2. |
