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To: Judith Williams who wrote (42755)	5/17/2001 5:27:52 PM
From: Thomas Mercer-Hursh	Respond to of 54805

I think Judith has covered this just fine. The example I was going to give was my own company. We sell a sort of ERP solution for distributors and many of the prospective customers have limited IT savvy in-house so they often look to us to provide a complete hardware-software-services solution. In many cases this will include components like PCs and printers which are commoditized and where we couldn't really compete head to head on price, but where the customer likes the wholeness of a single point of supply so we get that part of the sale anyway.

To: Judith Williams who wrote (42755)	5/17/2001 7:05:41 PM
From: EnricoPalazzo	Read Replies (2) \| Respond to of 54805

Thanks to both of you. I believe I understand now. So if I understand correctly, it sounds as if wholeness is typically an attribute of early in the TALC, but this doesn't necessarily have anything to do with the size of the company?

To: Judith Williams who wrote (42755)	5/18/2001 1:32:38 AM
From: Bruce Brown	Read Replies (2) \| Respond to of 54805

I took Thomas's "wholeness" to refer to end-to-end solutions. Christensen commented at the conference that companies early on the TALC offer end-to-end solutions for specific problems--in other words, one-stop shopping. As they mature, however, he contends that certain components become a focus of innovation and are also prey to attack from below, then later to commoditization as attackers fight for share on the basis of price. This process can be seen in the OC-192 router: Csco had an end-to-end solution; Juniper stepped in and focused energy on improving the part and stole market share with the improvement. --Judith Williams Actually, Cisco had no OC-192 router until recently. Hence, Juniper wasn't 'stealing' market share from Cisco as Cisco had no product to sell in that space. Previous generation 'high end' was OC-48 (Juniper M40/M20 and Cisco's GSR 12000 series). It's still 'high end', but is becoming more mature and as the generations of equipment are released in the future, what was 'high end' will slowly become the new 'lower end' via natural transition. So your comment of grabbing market share in the OC-48 space would have more credence as where Juniper staked their claim before they moved to the next generation of OC-192 (Avici, Cisco and Juniper all have OC-192 products now). Of course, the next generation of 'high end' is already well underway beyond OC-192, but to narrow it down to 'speed' is not the most notable focus for the application of the IP backbone. There are a lot of broken problems trying to be addressed via software/hardware throughout the protocol and end customer demands. By the way, the high end market only had revenue declines of 10% from the previous quarter (low end had a 41% decline and the ethernet switch market had a 14% decline). We'll probably see a flat to slightly down around 10% current quarter as well. In terms of the being attacked from below, the OC-12 space best describes that. According to the most recent Dell'Oro report, Juniper is now the number two competitor in the lower end (OC-12) as well with their M5 and M10 products which grew 194% in the latest quarter. Unisphere had impressive growth in this space as well with 61% growth from the previous quarter. Although Cisco saw revenues drop 48% in this space, they still dominate it. Cisco had $440 M in revenues in the overall low end market compared to $102 M from a combined revenue base of the number 2, 3 and 4 players of Juniper ($47 M), Unisphere ($30 M) and Nortel ($25.2 M). However, Cisco's revenue drop from the previous quarter of $853 M to $440 M in this space is significant. However, the overall market in this space dropped 41% from the previous quarter, so Cisco's drop wasn't too much more than the overall market. I imagine there will be quite a price war in this segment as competitors battle for market share. Then there is the largest market in terms of revenues via the ethernet switch market (incl. Layers 2, 3, and 4-7 SLB) which dropped 14% from the previous quarter, but still did $3.3 Billion in revenues. That Dell'Oro report was released yesterday and displays the top 6 players in the market in terms of their quarterly progression. I didn't purchase the report, so I don't know the revenue numbers breakdown, but Cisco declined 16% which was about the same as the overall market drop of 14% from the previous quarter. Others dropped more than the overall market in this space (Nortel, 3Com, Extreme). delloro.com So if you go through the categories of ethernet switches, routers and WAN, Cisco has competition from many players because the market has grown so large in the past few years. Total revenue from routers in Q1 of 1998 was only $26 Million. Nortel alone had that much revenue in the past quarter from the OC-12 space. BB