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Technology Stocks : Nortel Networks (NT) -- Ignore unavailable to you. Want to Upgrade?

To: joarel who wrote (5885)	5/20/2000 9:50:00 AM
From: Kenneth E. Phillipps	Read Replies (2) \| Respond to of 14638

Layer 2 switches are already a commodity. This forced COMS out of the business. Layer 3 switches are rapidly becoming a commodity. That is why the decline of Nortel's shares of Layer 3 switches is largely irrelevant. Open IP will place a lot of pressure on the margins for LAN switches and routers. Switching and routing is moving to semiconductors and embedded software. This trend will continue from the LAN into the MAN and WAN. More innovation is taking place at the chip level as opposed to the switching and routing level. This is not good news for Cisco. Once again, Nortel sees the trend and is rushing to meet it with open IP. N+I busy, but hushed Sat May 20 00:00:00 EDT 2000 May. 19, 2000 (Electronic Engineering Times - CMP via COMTEX) -- The Spring Networld+Interop confounded expectations by being one of the busier N+I shows in recent memory. The LAN market has indeed commoditized, and N+I has had only partial success attracting carrier-based OEMs who go to the Supercomm show in June, or e-commerce application software companies who prefer Internet World (recent financial trends would suggest the latter customer would not be one to pursue). It's hard to pinpoint what would account for the N+I surge. The mood this year was odd, as well. No overarching theme for the show, not a huge flush of enterprise customers ready to spend money after the flop of the Y2K scare, and a relative lack of booth noise. In fact, things were oddly quiet, as though everyone was holding their collective bated breath. Around midweek, it hit me how the show had really changed. More than half the articles in the N+I daily dealt with semiconductors and embedded software. And the degree to which the show has moved downstream to developers, rather than OEMs or resellers, is striking. We heard from every IC vendor in the business that customers don't just want full system reference platforms any more; they want bundled software and service solutions, allowing OEMs to turn into mere packagers and support-service deliverers. That spells commodity in the LAN, MAN and WAN. We are not talking about a mere price crunch in Layer 2 enterprise switches, which already occurred and forced 3Com and others out of the LAN business. We are talking about a time, perhaps two years hence, when Great Wall Industries of China will be able to offer a content-aware Layer 7 switch for WAN edge duties, using semiconductor and embedded software content to offer a feature set almost as rich as the internetworking experts. This is one of the factors that led to Cisco's glum conference call with financial analysts midweek during N+I. The need to rush ahead of the commoditization curve also was a key behind Nortel Networks' pushing its "Open IP" routing software so aggressively at the show. There are still plenty of value-added opportunities for internetworking OEMs exploring new realms, such as optical transport or wireless Internet services. But maybe the hushed tones at N+I were the result of thousands of voices in attendees' heads saying "You could be replaced by a machine."