Free upgrades to Sportstors - for purchases made between 11/25/96 - 12/31/96 (from
USR sales rep). The following article has a different time period.
I found this from hyperion.quotron.com (courtecy of Janice):
11/20 FOP USRX: LONG LINES & FAST MODEM SPEEDS; COMDEX `96 OBSERVATIONS &
SYMBOLS: USRX S/COM S/CUS S/CNA I/TELECM I/DATAPR I/COMPUT
ANALYSIS...P1
Part 1 of 2
Oppenheimer & Co., Inc. November 20, 1996
U.S. ROBOTICS CORPORATION
Long Lines And Fast Modem Speeds; Comdex '96 Observations And Analysis
Steven D. Levy (212) 667-7062
Sender Z. Cohen (212) 667-4744
Rating: BUY
USRX-OTC (11/19/96): $66 1/8 Dividend: Nil
52-week Range: $105 1/2-$32 1/2 Yield: Nil
Shares Outstanding: 96 Million Fiscal Year Ends: September
Market Capitalization: $6.3 Billion Debt-to-Capital: 12.7%
Earnings per Share: P/E Ratio:
FY 1994 $0.52 FY 1994 127.2X
FY 1995 $1.05 FY 1995 63.0X
FY 1996 $2.36 FY 1996 28.0X
FY 1997E $3.50 FY 1997E 18.9X
Oppenheimer & Co., Inc., or one of its affiliated companies, makes a market in
the securities of this company.
Oppenheimer & Co., Inc., or one of its affiliated companies, managed or
co-managed a public offering of securities for this company within the last
three years.
Quarter ending December 31 EPS estimated at $0.72 vs. $0.45.
Company Description: U.S. Robotics is the leading designer, manufacturer and
marketer of dial-up connectivity products, systems, and software, used for
remote access to information networks.
INVESTMENT CONCLUSION: For the past two days we, and more than 200,000 others,
attended the annual Fall Comdex PC technology trade show in Las Vegas. Our
main intent was to further investigate the potential 56,000 bit per second (56
kbps) product offerings and what they mean for USRobotics. After having spent
almost as much time waiting in line for either a taxi or to register for the
exhibit hall entrance card--which was free--as we did visiting company booths,
our conclusions about the impact of the upcoming 56 kbps upgrade cycle were
reinforced. Essentially we have maintained a two part view of this
increasingly important technology introduction: (1) 56 kbps is good for the
entire remote access industry and particularly good for USRobotics as the
market leader, and (2) USRobotics' time-to-market advantage of at least three
months gives it an even greater edge on competitors in both segments of its
business, modems and systems.
More Modem Vendors Poised To Rollout x2
In addition to witnessing a live demo of USRobotics x2 products--they really
are real--we had the opportunity to discuss the 56 kbps product cycle with
about 10 other modem vendors and the leading provider of fixed function modem
chip sets, Rockwell (ROK-NYSE $62 3/8, rated Buy). Based on these discussions
we believe that USRobotics and its semiconductor partners Texas Instruments
(TXN-NYSE $54 3/8) and Cirrus (CRUS-OTC $20 ) are likely to win quite a few
new accounts with the x2 56 kbps technology. Additionally, as we described in
our report dated November 15, Cardinal Technology became the first
non-USRobotics modem vendor to jump on the x2 bandwagon. Although it is hard
to forecast the magnitude of the change, its direction is clear; toward x2.
The importance of this trend for USRobotics goes well beyond the potential
license fees it might generate. Dramatically increasing the number of modems
using x2 at the client end of a remote access connection increases the utility
and therefore the need for x2 ports at the Internet Service Providers
points-of-presence (ISP POPs). This is the company's fastest growing business
and the one with the largest incremental impact on the bottom line.
A Reality Check For x2; USRobotics Still Appears To Have A Meaningful
Time-To-Market Advantage
The only company at Comdex with a real demonstration of 56 kbps products, in
our view, was USRobotics. The company was conducting regular 56 kbps calls to
a live ISP site over the regular phone network at its main booth and was also
showing off its x2 products in a private room that allowed closer inspection.
The x2 technology is now scheduled to go into final quality and assurance
control during the next week and then ship out to a few large initial ISPs for
trials a week later. Final product development seem to be on schedule for x2
rollout for Sportster products in January with the remaining x2-enabled modems
and remote access systems available in February. Given the time it takes to
roll out the upgrades to USRobotics' ISP customers, a period likely to be
measured in days, we believe that the company's time-to-market advantage for a
complete end-to-end 56 kbps solution is at least three months.
USRobotics Expands Its Free x2 Upgrade Program To The Sportster Brand
Although it does not appear to have been widely disseminated, we have found
out, and confirmed, that the company told its resellers that any Sportster
28.8/33.6 modem bought between October 1 and December 31 will be upgraded at
no cost to the consumer. This is significant in our opinion, because it
removes yet another potential concern regarding USRobotics' short-term
results--i.e. purchase delays in the December quarter. Since most Sportsters
will require an EPROM chip swap-out, at a cost to USRobotics of $6 to $8 each,
this program does not appear to be sacrificing too much of the company's
profits in the way of upgrade costs. In fact, this facet of the 56 kbps race
could actually accelerate USRobotics' market share gains and allow it to
consolidate even more of the modem market in advance of the formal x2 product
deliveries.
The free upgrade program also leads us to believe that USRobotics is planning
an even more aggressive initial pricing of 56 kbps modems than previously
thought. While we have consistently maintained that the company would charge
a meaningful premium of $50 to $75 for x2 on top of the cost of today's modems
plus an unspecified upgrade cost, we had been thinking that the starting price
point would be in excess of $200. It now appears that USRobotics is
positioning x2 modems at prices as low as $150. The rationale supporting this
conclusion is that with some Sportster models selling for less than $100, and
the upgrade to x2 now known to be free, USRobotics can still create a tiered
pricing structure that differentiates its highest speed modems and be quite
aggressive with the new x2 modems. In other words, the new 56 kbps modems are
likely to be even more attractively priced than in our original model.
more to follow in Part 2 of 2
First Call Corporation - all rights reserved. 617/345-2500
END OF NOTE
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The server has just stopped working. I will post the 2nd part when the server
comes back. |
