I keep telling my self I am going to stay out of the ridiculous partison bickering on this thread. However, someone or another posts some crazy imaginary statistic which compels me to write. Investors have a hard enough time getting unbiased facts to make appropriate decisions without undisciplined journalists writing half-truths and mistruths as facts. This thread has the added burden of a handful of posters who have an agenda - either cheerleaders who object to any hard analysis of their beloved Cisco, or on the other side, bizarre provacateurs who take poorly supported pot-shots at, what is, certainly a great company. So in the spirit of trying to find the fact-based path that leads to investment insight:
1. The LU-ASND does not have 45% overlap of products. LU has less than $100 million in annual revenues from remote access, most of that in PortMaster3's sold to small ISPs, which rarely buy ASND equipment anymore. Yurie now has revenues of about $150 million which overlaps with the Sahara product from ASND which has revenues of about $25 million. The MX1000 ATM switch is a dog and has not shipped for revenue yet. I count about $125 million in "overlap" which is not 45% of any statistic I can find. Totally irrelevant.
2. Believe it or not, many LU employees have stock options now, and more will in the future with the shift away from the pension plan that was announced last week. No managers, sales people, or engineers are union members. Since most manufacturing and field maintenance (most of the CWA and IBEW workers at LU) is outsourced for Ascend, there is almost no likelihood of "considerable friction bubbling up" because of the union. If any of you talked to a reasonable sampling of ASND employees, you'd realize that a very large percentage are extremely excited to join LU, already accustomed to doing so through their existing partnership, and united with their LU bretheren in their common hatred of Cisco. Don't expect LU to teeter around like a drunk while Cisco steals all their accounts and don't expect teams of disillusioned ASND engineers to show up at 350 Tasman road begging for employment. It is not going to happen.
3. What you can expect. LU and Cisco will increasingly compete head to head for carrier data accounts - ATM, remote access, high-end routers. Believe it or not, the LU/ASND combination sells 50% more data equipment to carriers than Cisco. Both have been gaining share rapidly and will likely continue to do so. This will be a high growth market and both companies will do well - as will NT, maybe NN.
4. When it gets down to it, the overlap between LU and Cisco is still small. Cisco has about $1.2 billion in Carrier data and nothing but ambition in the voice world (which is not going away for a long, long time). LU has about $1.8 billion in carrier data equipment and less than $400 million in Cisco's bread and butter enterprise data market. It leaves Cisco relatively unthreatened in its $7 billion + enterprise market and Lucent unscathed in the $28 billion in revenues where its sales people never see Cisco.
5. 3 or 4 years from now it will get more interesting, as carriers (other than rate arbitrageurs and opportunistic ISPs) begin to actually migrate to a packet-based architecture. Cisco has a matchless IP routing legacy, terrific people and a running start. Lucent has millions of man years of communications software code, matchless optical technology, a lead in ATM (via ASND), terrific people and an extraordinary customer list. Again, I think both will come out winners, with a lot of also rans sitting on the sidelines crying in their beers.
John Chambers has enormous respect for both LU and ASND. Cisco has been preparing for this combo for a long time, but there is still alot of work to do. Don't just assume Cisco will trash LU. Lucent is not Bay Networks or Cabletron, and the battle is on Lucent's turf. |
