Pat,
We try hard not to be biased - it is not conducive to making money. We were not so enamored with Ascend a year ago when 56K modem upgrades caused their flagship TNT RAC to lose software stability. However, it is a testament to the enormous switching costs in the RAC market and Ascend's all hands on deck response that not a single major NSP/carrier customer switched away from ASND during that time.
I fear you are reading animosity toward NN in my responses - I actually like most of the team at NN, and would love to be able to jump in at the current, seemingly low, price. However, the market does not care about the P/E valuation of networkers - cheap companies tend to stay cheap and expensive companies tend to get more so - unless there is a specific catalyst to shift momentum. I see no such catalyst for NN in the near term. We think NN will make its October quarter, but barely so and with a strong contribution from a TDM business we all know will eventually fade away.
BTW I do not believe that NN's book of contracts will prove to be as lucrative as Ascend's in the next 12-18 months - and I do know what contracts NN has won, they send me a lot of faxes and I do a lot of check ups. Yes, USWest still does business with NN (and Ascend BTW) but NN had been a rock-solid incumbent with close to 100% of the ATM business, so from a market share standpoint, you've got to consider it a net loss. I hold by my prediction of flattish market share and am taking a six month wait and see approach on NN. I hope for your portfolio's sake that I am wrong.
As to the original question, and the reason we are discussing this on the LU thread, I believe that LU needs to jumpstart its position in carrier data networking. While I believe LU will make its next two or three quarters in any case, to meet long-term growth projections and to live up to the company's vision, it needs to be a leader in ATM, remote access/VoIP, and routing. Given the enormous switching barriers in the first two categories - (the woeful performance of the very good PM4 RAC line with carrier customers after paying $650M for livingston should be ample evidence for LU) - LU should ante up for the clear #1 in selling carrier class equipment into carrier networks, ASND.
As for NN, as I have stated, I believe that it has a strong customer base (just not as strong as ASND) and an aging 36170 platform that is insufficiently dense, over-costly to manufacture, and lacking the processing horsepower in its current architecture to implement competitive feature sets for IP. I believe CSI to be a serious misstep, as it takes NN 180 degrees away from the rest of the IP world which has rallied around MPLS. Granted, some of NN's loyal customers will probably begin to deploy, but it is unlikely to find favor with any serious IP shop. I know there is a new 50G switch coming next year which is likely to overcome many of the current problems, so we'll see what happens.
Now as for FORE. The rap is not that FORE does not have leading ATM technology - it clearly does. What it doesn't have is leading multi-service support. For the services required by most carrier customers - Frame Relay, IP/MPLS, etc. - the ASX doesn't compare. It also has very poor fan-out for supporting sub-rate customer connections. It's primary use by carriers is as a high-speed (OC12c, OC48c) aggregator for Cisco GSR and 7500 traffic in an internet. A couple points - this is a stand-alone application which is threatened by a clear move toward multi-service ATM configurations. Two, for the true stand alone IP shop, they will strongly consider IP over SONET or IP over DWDM when terabit routers make it a reality at OC48 and higher, thus squeezing out FORE in that direction. As such, FORE would not give LU a leverageable position in Carrier ATM. BTW, FORE is clearly the leader in enterprise ATM technology, and perhaps LU would want them just for that, but I don't think so. |
