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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: RetiredNow who wrote (32828)	3/19/2000 1:32:00 AM
From: Eric	Read Replies (1) \| Respond to of 77400

Mindmeld Good posts tonite! I have followed the Telcom industry for over 30 years and when I decided to invest the majority of my money in Cisco in the early 90's it was after deciding that Cisco was executing better than the others. The only surprise for me since was just HOW WELL Cisco has executed! The other two have a long, long way to catch up in that department! Eric

To: RetiredNow who wrote (32828)	3/19/2000 1:25:00 PM
From: telecomguy	Read Replies (1) \| Respond to of 77400

"there is still plenty of room in this $250 billion market for Nortel and Cisco" This is the common accepted wisdom but I am not sure about this at all. Look at 3COM. I am sure same things were being said about their prognosis when they started competing with Cisco. In the high-tech field, quite often if a company makes one or two strategic error, it's ADIOS BABY. That's because the high-tech market moves so fast and if your product/service/support package is no longer competitive or aren't good enough to penetrate new markets in a cost effective manner (re CSCO's attempt to crack the public networking market), the resulting impact on the bottom line is much more swift and severe than in the old economy where consumers continue to buy BRAND NAME regardless of the product value. Remember CSCO is NOT a brand name in the Carrier market. NT, LU, ERICY, ALA, SIEMENS, NOKIA, MOT, FUJITSU,........are the brand names and even they get turfed out amongst themselves if their product value proposition is not competitive (i.e. LU in the optics space and MOT in the celllular market). I am afraid 'BUYING' companies is not necessarily the way to win in the Carrier market. Buying component technology to COMPLEMENT and integrate your existing product platform makes sense but to think that CSCO can buy Pirelli (a two bit optics player) and instantly gain the respect of PTT's is little bit amusing and amazingly naive on Chambers part. Having said that, Chambers KNOWS that the enterprise/edge market is growing towards the core of the network in the long-term so as much as CSCO's strategy is a high-risk one, he probably came to the conclusion that they have NO CHOICE but to take the risky strategic decision to reorganize CSCO to allow it to compete with NT and LU. I am just not sure whether they are up to this monumental task and I am not sure whether the average investor understands the risks involved in this strategy. Chambers bought companies in the enterprise/router market and parlayed good brand name, FIRST to the market advantages and the fantastic growth of the overall router market to bootstrap CSCO to where it is today. You can do that in the PRODUCT business (like router market). Why? Because good standalone router products can be 'bought', re-branded as CSCO and rolled out to the market WITHOUT any technical modification/integration/R&D right away.....this was CSCO's trick (along with good aggressive marketing/sales/support). Same strategy will NOT work in the Carrier market. You just cannot buy Cerent or Pirelli one month and then re-brand it under CSCO and expect Deutche Telecom & QWest's to come knocking on CSCO's door! CSCO has to take the core technology and embed/integrate/complement their existing carrier networking platform WHICH THEY DO NOT HAVE. OK, so then CSCO pundits will say no problem......we will just BUY EVERY SINGLE COMPONENT technology companies that make up ALL THE FUNCTIONALITY of NT's unified voice/data platform...and presto, we will be able to compete with them no problem! Hmmmmm............where is the weakness in this argument? Pretty obvious I would say. Don't get me wrong. CSCO will get dribs and drabs of small little sub-contracts from the Carriers & the PTT market but that will be the extent of their penetration. They will NOT be the prime contractor signed up to build the entire network. Those contracts will go to NT, LU, ALA, ERICY. I also noted some CSCO lovers to claim that CSCO is already penetrating the Carrier market but if you actually look at how they report the numbers, most of that revenue is actually ROUTER sales to the Carriers/PTT's/ISP's. So all they've done is split the router sale between Enterprise (end-users) and public network operators (carriers, ISP's, PTT's, etc.). Bottom line? Still no penetration in the public network buildout sector. All the contracts are STILL going to NT, LU, ALA,........ERICY, NOKIA, etc. CSCO's best bet is to stay in the enterprise market for routers and become totally dominant. Even as many of the on-premise router apps will migrate toward the network, there will still be a huge market for enterprise sector but sometimes people get greedy and their own success cloud their vision in terms of what brought them their success and all of a sudden extend/extrapolate such past success into future successes in unrelated, non-connected new industry where inevitably they falter.