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To: Boplicity who wrote (3371)	8/6/2000 11:05:39 AM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 13572

From the latest Bearron's> Wireless, as in wireless telephones, a scant few months ago was the big buzz. Lately, alas, it has been providing more static than buzz. One leading maker of cell phones after another, including Qualcomm, Nokia, Motorola and Ericsson, has been the source of news that has roiled the individual stocks, the group and techs generally. Nothing particularly exotic about the nature of that news: Demand is not living up to anticipation. The business is by no means falling apart; sales are still climbing briskly. But because expectations were so high and the wireless stocks were fully priced to meet those expectations, even a modest scaling back of projected growth has had a wicked investment impact. Qualcomm, for example, which reached 200 early in the year, closed a touch over 64 on Friday. Motorola is down from nearly 62 in March to below 37. Nokia has fallen some 20 points from its 62 high. Yet most of the stocks still command a premium multiple -- even based on next year's likely earnings. That suggests there's still room on the downside for the stocks. So insists Doug Kass of Seabreeze Partners. He has an extraordinary record: So far this year, net after his fees, he is up 41%. And that's atop a smashing performance in '99 when, again after subtracting the hefty fees a hedge fund charges its limited partners, he was up 72%. We've quoted Doug before and to good purpose: He was short a number of Internet stocks (remember them?), most of which have handsomely repaid his skepticism. Doug also has been short the wireless group for the past three months, and he's in no rush to cover. The weakness in cellular, moreover, means bad things are in store for many of the semiconductor makers as well. And, putting his money where his mouth is, he has shorted the stocks of selected chip producers. His reasoning here is that cell-phone demand for chips has been mounting swiftly and, in terms of the growth of the semiconductor market, is currently a greater spur than computers (the latter still account for larger absolute volume). Doug's negative view of the Street's high hopes for wireless springs from his study of the potential market for cell phones and contrasting what he found with spectacularly extravagant analysts' projections. Understand, Doug expects the market to grow quite rapidly -- but not at the exponential rate with which the Street justified (excused?) those absurd P/Es awarded the wireless wonders a few months ago. By his reckoning, if cellular demand continued to soar at the rate it did last year -- a prospect underlying a number of brokerage-house projections -- by 2006, a grand total of six billion handsets would be sold: one for every man, woman and child on the face of the earth. As he wryly points out, not a few of those six billion folks lack the electricity to charge up a cell phone (a small detail that no doubt progress will attend to). What encourages Doug in his conviction that the downturn in the wireless stocks has yet to run its course is that he hasn't found an analyst with a Sell on them. Almost universally, he says, they're in denial and steadfastly continue to put out buy recommendations (the odd Neutral is the exception). Comes the revelation, the resultant stampede to downgrade could trigger a final salvo of selling. So, how far down is down? Well, in the case of Qualcomm, Doug feels, the stock, which closed Friday at 64, might eventually work its way down to around 30. In like vein, Nokia could go from 40 or so to 25. Even Motorola appears vulnerable: He sees it dropping around 10 points from 36-and-change. As we noted, he expects the slowing in the cell-phone market to affect-and not for the better-the semiconductor makers. And those stocks already have hit the skids. Here, too, he espies an ominous reluctance on the part of analysts to adjust their estimates to what's happening in the real world. Doug is short Micron Technology, Advanced Micro Devices and Cypress Semiconductor, all of which are already down a bunch. His target for Micron, 73-plus, is 55. AMD he sees going from 62 to 35, and Cypress from 33 to 25.

To: Boplicity who wrote (3371)	8/6/2000 11:45:31 AM
From: hivemind	Read Replies (1) \| Respond to of 13572

Greg, It would be hard for me to believe that CSCO would let the upstarts take out what should be their fastest growing segment, the ISP market. Of course this can certainly happen, but I wouldn't bet on it. Hedge maybe..... :) There is also a huge advantage accrued to CSCO with regards to technical knowledge and experience in network engineering - It is far far better to have CSCO specific on your resume then say NT, at least as I have seen in network engineering jobs. Ability to hire staff who can support your network's growth will also enter management's decisions on which vendor to standardize on and deploy. I had seen this happen in the emerging layer-2 switching market, where CSCO lagged badly in it's technology, but eventually stomped the competition though various advantages. They did not stand still. I am a novice when it comes to the world of optical networking, so please anyone come and correct me if I misunderstand or misstate: As I understand it, the current state of the art is to switch light carrier frequencies (lambdas?) without ever entering an electronic device to make switching decisions. This optical-optical switching would be inherently (orders of magnitude?) faster than having to do optical-electronic-optical switching. However, there is a big difference between switching carriers, switching packets and routing packets. Switching carriers is akin to what AT&T does with your phone (even though internally they are doing this with electronic packet switching like ATM right now). Routing packets involves running the packets through a computational engine which will determine the next forwarding point towards final destination. Here is a thought experiment based on the idea that we will have to route packets optically in the future. Perhaps we won't have to route, but I don't see how at this point: Say we have a largely mechanical form of packet routing & switching infrastructure in place, with routing done by mechanical computers which are inherently slower than the new technology, electronics. The end equipment might be mechanical teletypes, just to complete the picture. The growth of the new E technology is fantastic because it is far superior to existing mech tech, and people all over the place are scrambling to install the new electronic teletypes and electronic-mechanical-electronic switching and routing systems. It all works pretty fast, but engineers and managers know that all-electronic routing and switching systems would be far superior. But here is the point of all this: Where is the electronic computational device that will allow electronic-electronic-electronic routing so packets will stay* at full electronic speed?* In this experiment, electronic computers have not been developed yet. So we would be operating in an environment where you could switch electronic-electronic but could route only by electronic-mechanical-electronic. In today's world, where is the optical computational device that will allow for light-speed routing of packets to take place? The Internet still runs on packets, and routes need to be computed. This is the hard edge where CSCO holds the cards. We would need to see the Internet go fully optically switched for the routing layer to be obsoleted. I'm not saying this won't happen, but I don't see this yet, and frankly, how this could be done engineering wise. I would like to see a network diagram which details exactly how such a proposed all optical switched Internet would operate. hivemind