Looks like FIBR finally fell in sympathy with the rest of the Networking stocks today. But was the drop really justified? As most of you know, the culprit today was Three Com (COMS), which makes Fast Ethernet Network Interface Cards. They lowered their price some 40% in response to last weeks move by competitor Intel (INTC). Together, these two companies make up about 70% of the market for these devices. The problem with COMS is that these cards are the blood and oxygen of the company, making up a healthy % of the company's revenues, thus the precipitous fall in price.
The main question becomes: "Do these price cuts spell doom and gloom for Osicom?" Fortunately, the answer appears to be NO! The Fast Ethernet cards that were subject to the price cuts by INTC and COMS are of the "plain vanilla" nature and are distributed through resellers. While Osicom does sell Fast Ethernet cards, they are highly specialized and utilize ASIC technology (application specific integrated circuit), which is a means of customizing the products for specific applications. This is the main differentiating feature of Osicom's products vs. it's competitors. Comparing Osicom's card to COMS or INTC's would be like comparing a helicopter to a skateboard...... with a skateboard, you can get from point a to b, provided there isn't gravel or lakes in the way, but a helicopter will get you around the lake and over the gravel.... there's only so far you can go with the skateboard. INTC's & COMS card is made for the mass market and serves as a general purpose card. Because of it's advanced features, Osicom's Fast Ethernet customers are all OEMs and marketed as a highly specialized solution.
Where COMS failed, FIBR thrives. Diversification is key. Osicom is well positioned in the majority of the sectors in the Networking industry. While Network Interface Cards should make up about $35 - 40 million of the estimated $185 million in revenues this coming year,the Fast Ethernet Cards is only one of the cards they make. They also make ISDN, FDDI, and regular 10m Ethernet cards. In addition, other product lines that would uphold any deterioration in margins include CSUs/DSUs, Frame Relay Encryptors, Concentrators, Routers, Hubs, Switches, Remote Access Products, Video Switches, ... etc |
