Zoltan, in case you missed this article from StreetAdvisor.com, that paints INTC as potential serious threat to Cisco"s routers. Do you concur with this author's take?
Tulvio
Optic Opportunities
Fayad Abbasi
Apr 21 2000 In the infrastructure arena, there is great confusion as to how some companies, such as Cisco [CSCO] and Nortel [NT] will compete. To help understand some of the issues, we'd like to try and explain the open systems interconnection (OSI) seven-layer reference model. This model is the basis for the infrastructure of the telecommunications backbone and it is essential to understand the model to know how the battles lines are drawn.
The OSI model consists of seven layers:
1. Physical Layer: The hardware connection level. This consists of the cables, or optic fibers, that connect two destinations.
2. Data Link Layer: This level comprises the codes, protocols, bit rate information, etc. governing data transmission. Optical switches operate at the data link layer.
3. Network Layer: This is the routing layer. The header information is read and information is then routed at the network layer.
4. Transport Layer: At this level, the signal is actually transported down the line. Up to layer three, information is transported on a general level. In layers four to seven, the process is more software based.
5. Session Layer: At this level, a session is defined. How it begins, how it ends, and how the dialog is managed is established here.
6. Presentation Layer: The presentation layer defines the "language," so to speak, between the two presenters. Essentially, syntax differences are resolved while the essence of the message is maintained.
7. Application Layer: This level is the interface between the world and the OSI environment.
The model refers to the levels through which a message passes when traveling the network. For example, a message such as an e-mail begins at layer seven--the application layer--and travels down to level one. It then travels back up to level seven, where the user on the other end can interpret it.
If you do not understand the OSI model completely, don't worry. The key point is to realize that the model is the basis for understanding how Cisco will battle Nortel, or even Intel [INTC]. By focusing on different layers, each company is trying to trivialize the other layers, and thus the competition?s position.
When you look to Intel and think of its competition, the first company that comes to mind is Applied Micro Devices [AMD]. However, that's going to change. In the future, the first company that will come to mind is Cisco. In an all-optical network, utilizing a technology called Dynamic Transfer Mode (DTM), Intel can run its servers directly through the network, using optical switches to route information in a circuit switching environment. With DTM, the need for layer three is minimal and Cisco is left out in the cold. Pipedream? Perhaps, but I think it is still too early to count anyone out yet.
Cisco, on the other hand, is trying to spread its influence beyond layer three down into layer two, obviating the need for many of the fancy switches Nortel and its cronies are trying to create. By sticking to Internet Protocol-based packet routing with monster, terabit routers (or faster), Cisco is ironically using the Intel model of increasing speeds to the point where it doesn't matter which protocol is used--as long as it can be dealt with by utilizing Cisco routers. The need to read information in the electronic realm remains, but the speed at which the information is processed is fast enough that it does not matter.
Right now, the all-optical network is still an idea. Brilliant engineers around the world are working on different ways of transporting information in the telecommunications backbone, but there's no way of knowing what will evolve.
One issue for investors to remember about these technologies is the appreciation of legacy systems. The use of new technologies may eliminate the problems of the existing network, but disposing of the installed base of millions upon millions of dollars of gear is not an alternative. Leveraging the existing network is key for service providers and exchanges, and hardware companies must minimize the cost and time of upgrading a network. If they don't, the technology will never make it.
Fayad is a semiconductor analyst for StreetAdvisor.com. As a full-time employee of StreetAdvisor.com, Fayad is prohibited from actively trading individual stocks, options, and bonds. As per company policy, Fayad has not opened a new position in a stock since February 1, 2000.
Copyright 2000, StreetAdvisor.com, LP. |
