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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: Sir Francis Drake who wrote (24001)	6/10/1999 10:27:00 PM
From: Maverick	Respond to of 74651

Office2K will force the adoption of caching systems. MSFT already has 130K proxy caches deployed. Separately, we met with Peter Christy, the network caching expert from Collaborative Research and the person responsible for the most widely tracked caching market estimates. He indicated that current agreements between telecom carriers and ISPs provides no incentive for deployment of caching systems and will need to change for caching to grow considerably in the United States. Industry growth was also hampered by Cisco's weak product introduction. Cisco, he believes, should be able to take 30-50% share based simply on its router dominance. Mr. Christy expects a revamped product from Cisco this year to improve the company's position. He said Microsoft's Office 2000 will encourage the use of HTTP documents over email, potentially putting considerable strain on corporate networks. Mr. Christy projects such applications will push HTTP traffic from 15% to 85% on corporate networks, forcing the adoption of caching systems throughout the enterprise. In addition, he sees numerous companies and developers migrating towards the outsourced systems topology, where browser-based applications are hosted by third parties, relieving enterprises of the burden of rapid technological change. In a world where bandwidth is expensive relative to caching, such outsourcing will also spur deployment of network caching. While Mr. Christy believes the market for caching will explode, Network Appliance will face increasing competition. He said Microsoft has yet to understand the caching market, but already has 130,000 proxy caches deployed and could take considerable share with an improved product. Lucent is entering the game, Novell is gaining steam, and Cisco should rebound. Inktomi, which runs on Solaris systems, benefits from ISPs' love affair with Sun servers. We see Network Appliance keeping pace with caching industry growth, though price declines could bring margin pressure over time. By Merrill Lynch Research.