. . . 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.
apart from being smack in the center of a market that's exploding, I believe there is a major catalyst, but there's no way I can prove it. We'll have to wait for news.
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.
Ascend and NN both have strong customer bases. They're different and each covets the other's space.
I've been thinking about mind share and how it can overtake a stock against all logic --- in either direction. Do you realize Ascend had revenues of $1.3 billion over the last 4 quarters and NN had $1.125 billion in the same period? Based on ASND's outstanding shares of 197.824 million and NN's of 175.775 million, it turns out Ascend had $6.57 in revenues per share and NN had $6.40. Granted, NN had the UBNet losses that have to be accounted for, but my point here is that they're both doing about the same amount of business --- a fact that won't be lost on anyone looking to acquire.
For another interesting comparison, chart Ascend's crash of 3/31/97 with NN's of 1/30/98 and see how long it took for Ascend's stock to rebound. Even though they had positive numbers on 9/30/97, 12/31/97, and 3/31/98, the stock couldn't hold above 30 until around March of '98, a full year after the fall. If the Street responds to NN in the same time frame, then we've definitely turned a corner and could expect serious coverage after the next earnings report.
As for MPLS versus MPOA, whatever standard is chosen will be implemented by all the vendors. Right now there is no standard and according to all the speakers representing the IETF, politics have fragmented the process and it appears there won't be one any time soon. It's become so serious the speaker from UUNet said they've announced a meeting among carriers to work on the problem outside the IETF. Over 300 representatives, worldwide, have responded.
There's also a new protocol called FNNI that's fairly easy to implement that may be used, and apart from this, almost every speaker at the conference said when you're dealing with high speed bandwidths, the cell tax issue becomes insignificant.
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.
I don't know anything about FORE, but when it comes to the IP over SONET debate, there are as many opinions as there are vendors, and since there's no single solution that meets all needs, and since there won't be any one layer disappearing altogether --- mutated, yes, but not destroyed --- I'm not going to waste time debating the issue.
Another factor that was emphasized over and over was network management. Every carrier and/or ISP represented --- UUNet, MCI/WCOM, AT&T, Sprint --- put it at the top of their list as a critical need in the exploding data-centric networks. AT&T is using NN's total management system and that's not a bad endorsement.
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.
I'm not a big football fan, but I've watched enough to realize that saying the quarterback should make a specific move doesn't mean he'll do it.
I hold by my prediction of flattish market share and am taking a six month wait and see approach on NN.
I disagree on the flattish market share, but I do admit I often err by being in early. Just the same, I'm pleased to say there are some world-class funds who agree with me.
When you say NN's 36170 is based on an aging platform, you lose credibility. The 3.1 was released last quarter and to meet a slightly different need the 36177 came out at InterOp a couple weeks ago. In the terabit router space, their affiliate, Ironbridge, is one of the leaders in the industry. This is tomorrow's core and when their chief architect, Ross Callon, led a tutorial on Monday, the Marriott ballroom was SRO.
The biggest buzz-words of the show were terabit routers and DWDM. On the latter, Cambrian shared the podium with Lucent and CANARIE on Tuesday. Pretty exciting industry and I'm way too tired to get out my notes. I'll save that for later.
Regards,
Pat
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