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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Eric Jacobson who wrote (27655)	7/11/2000 8:01:45 PM
From: stockgator	Respond to of 54805

Thanks Eric. Here is an excellent analysis on HLIT from Yahoo Yoda Board by sts_future. "I suspected that I was opening a can of worms when I made that statement, so, here goes. 1. I do not own (nor have I owned HLIT stock). And no, I'm not a current or past employee of HLIT. 2. My experience with HLIT management and staff has indicated no lack of integrity nor lack of honesty. I believe the company is well run. 3. Their products are well-respected in the CATV industry. Excellent packaging, performance and reliability. 4. There is nothing about their 1310 nm transmitters or their Fiber Nodes used for HFC distribution that gives them a clear differentiated advantage. They are basically commodity products. Here, they compete with over a half dozen other players in the US;(GI, SFA, CCBL, Philips, Antec, Synchronous, and ADC). HLIT, GI and ADC each have about 23% market share with the remainder split among the rest. This is a CUT THROAT business. Good profit margins are difficult to maitain. The business from the CATV operators is based largely on the lowest price and sales relationships. 5. The HFC upgrades in North America are near completion and should be about 90% completed by 2001. This has been an incredible upgrade in its breadth and depth and cable operators now want to make money on their investments before any additional major upgrades. Future upgrades will be limited to specific and selective neighborhoods. 6. HLIT is well-positioned internationally but still faces the same competitors and fugly margins. There still remains the question whether HFC or some other variant architecture (or technology) will prevail. 7. Their 1550 nm single lambda product was disrupting in nature in the early 90's. As price decreased and performance increased, they were able to address the lucrative headend consolidation market previously addressed by high quality "uncompressed" video with high speed digital tranport. This is sometimes referred to as a Metro solution. BUT, HLIT does not have a "Metro" product solution (DWDM or otherwise) in the same vein as Chromatis (bought by LU) nor Sirocco (bought by SCMR). 8. Their DWDM technology is geared specifically for analog transport applications - not digital transport (i.e., Ethernet, SONET, ATM,...). And, there is limited demand for a DWDM-based HFC solution. 9. I can say with reasonable certainty that the Lightwire architecture will not be deployed by Time Warner, Cox, or Comcast. There is no compelling reason for them to place a CMTS in a Node nor use DWDM in large scale within the HFC network for several years. And, I don't believe AT&T will deploy this in large scale either. Even if they do you can be sure that GI, SA, ADC and others will develop the technology - commodity again. 10. The Divicom acquisition was a good one. The product is good with a proven track record. It gets HLIT into new markets with new customers and allows them to compete more effectively with GI and SA. But I do see this as a defensive move in an effort to get into a growing market to replace the HFC market that is leveling off. Competition will be strong and I see no single vendor providing a market dominating solution. Bottom line: HLIT has no ascending nor currently disrupting technology. Most of their products can be considered commodity. Niether HLIT nor any of its competitors possesses a clear dominance. That said, I still believe they will rebound to respectable levels because of their ability to perform the necessary sustaining developments to their products to remain competitive and grow into new markets. I suspect, however, that it will be a rocky road." sg