Why COMS is a strong buy?
1. Misunderstood by the analysts and that is why low valuation and low expectation. NICs and Modem will rapidly become the lesser part of the revenue due to the surge in system sales and Palm sales.
2. Strong product cycles, with additional help of weak Cisco product cycles, demise of Bay, CS and FORE. Access Control, Path Builder and CoreBuilder are winning contracts quickly. With CB9000 holds the greatest threat to Cisco and it is clearly winning many ATM accounts from Cisco in the enterprise and will soon do the same thing with Enterprise Ethernet account. Cisco is losing LAN enterprise in the US for the past couple months, the more conservative large ISP will follow and it is just a matter of time, oversea market will follow.
3. Huge ATT contract – how do I know it? I am not an insider; maybe I have the crystal ball?
I will make a comparison for Cisco Cat 5500 and CB9000 10/100/1000 Ethernet layer 2 and layer 3 switching (i.e. ASIC faster IP/IPX routing) and you will see why I am bullish on COMS (only wish the execution on CB9000 is better, the vision is right and the deliver is late). One more reason to choose Ethernet is due to the market quick acceptance to Gig Ethernet and that is why 5 Gig companies has been acquired in the last 14 months:
Cisco Cat 5509 is a new form factor based on the old Cat 5500 design. The backplane is still the same old 3.6 Gpbs. Of course, Cisco will brainwash the publications with “local” switch BS without mentioning about the 3.6G backplane. This is the reason Cisco has not participated in any independent third parties comparison tests. Cisco is becoming so conservative and wants to protect its installed base of Catalyst 5000 users by offering older technology with much higher price.
CB9000 is a new Ethernet and ATM enterprise switch. 48 Gbps switching fabric now, with planned backplane to 560Gbps. It's layer 2 Gig and 10/100 wire-speed modules are shipping now.
Cat 5509 daughter board layer 3 can route 2Mpps. CB9000 Layer 3 routing of 56 Mpps. The only catch is both will be “really” be layer 3 ready by December time.
Cat 5509 has less port densities: 38 Gig Ethernet ports, or 192 Fast Ethernet ports. CB9000 supports 126 Gigabit Ethernet ports and 504 Fast Ethernet ports. One stupid thing Cat5509 has is one Gig switch module will occupy two slots (slot is an expensive property).
CB9000 has better RMON support (important for government and university) - Support for 9 groups of RMON and 6 groups of RMON2. Cat 5509 does not have RMON2 support.
In summary, Cisco presents a dog performance, sky-high price and limited management support product in a red-hot market. This is the first time in a while, someone has finally has a product to corner Cisco. It will be a while before Cisco coming out with a real competing products to CB9k, of course it could acquire a startup, but I do not see Extreme be part of it due to Coms is an investor of Extreme.
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