Pat:
From the 10Q:
We also anticipate substantial price decreases of
cable modems and headend equipment due to increased
competitive pressures in future quarters and the adoption of
industry standards for cable modems such as DOCSIS or
CableLabs-certified vendors, that may more than offset any
cost reduction efforts achieved, resulting in lower overall margins.
Put the second part of the boldfaced phrase first, and, IMO, you get a better context for the concerns driving the stock down. DOCSIS is where the market is going vs. where it is today, and in this new realm, the pressure from the 500lb. gorilla (CSCO) will be severe. To me, its no coincidence that the decline started on the day CSCO announced a deal for cable modems with the 5th largest U.S. cable operator:
cisco.com
Certainly they'll pass the standards issue, but it will simply let them into the cage with the gorilla. Mix in the loss of their founding technologist with the dumping by early investors, and you have too much uncertainty for the Street to bear (bad pun intended).
AOL flap is a sideshow, IMO. A key question in my mind: Is their strong position in Europe enough to keep them alive if they get into a fight with CSCO here?
Charlie |
