Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Cabletron Systems (CS: NYSE) -- Ignore unavailable to you. Want to Upgrade?

To: polarisnh who wrote (2584)	12/7/1997 5:07:00 PM
From: blankmind	Respond to of 8358

December 05, 1997, TechInvestor 3Com And Cabletron Plot Recovery Plans Jeff Caruso 3Com and Cabletron will move forward quickly to get back on track after both companies this week warned of disappointing quarterly financial results. 3Com, which like Cabletron disclosed that revenue and earnings would fall far short of expectations, quickly disclosed plans to address inventory problems in its reseller channel that played into the poor results. Santa Clara, Calif.-based 3Com said during the next few quarters it will implement an EDI system to monitor inventory levels. Chief executive officer Eric Benhamou said in a prepared statement the company's hit is just a one-time correction. In addition, 3Com said sales were hurt by weakness in the Asian market and the lack of a set standard in 56-kilobit-per-second modems. The inventories that U.S. Robotics maintained before its merger with 3Com earlier this year seem to have been "worse than we originally thought," said Noel Lindsay, director at Deutsche Morgan Grenfell Technology Group, adding that resellers may not have been giving 3Com reliable information about their inventories. High inventories can skew sales figures, since resellers will not order more products until they sell what they have in stock, he said. Companies are tempted to sell their products into the channel, building up inventories, to make their own sales appear greater, said William Becklean, senior vice president at Tucker Anthony. 3Com's disclosure coincided with Cabletron's revelation that it will also have lower-than-expected revenues for the quarter. Despite the gloomy financial news, Cabletron, in Rochester, N.H., is readying products that could help turn the tide. Cabletron next week will continue trying to reshape itself into a lower-end equipment supplier by announcing 10/100-megabit-per-second Ethernet switch modules for its products. These include a 26-port module for the MMAC-Plus, which is being renamed the SmartSwitch 9000 to match the rest of its product line. The module sells for $16,995. Cabletron also is unveiling a 16-port version for the SmartSwitch 6000 that will ship next month for $8,995. Although Cabletron faces its own obstacles -- including a new CEO and the recent acquisition of Digital Equipment's networking operations -- both 3Com and Cabletron are competing against Cisco, which is finding success at their expense by selling turnkey networking systems. They're also not targeting the service provider infrastructure as much as San Jose, Calif-based Cisco, and that's where the growth will be, said Roxane Googin, an independent analyst in Jackson, Wyo. "I think it's interesting that the bidding war for MCI is happening at the same time that these companies are having problems," she said.

To: polarisnh who wrote (2584)	12/7/1997 9:15:00 PM
From: Thomas George Warner	Read Replies (1) \| Respond to of 8358

R&D about 11.5% of sales

To: polarisnh who wrote (2584)	12/9/1997 9:36:00 PM
From: Miles Rhyne Hoffman, CFA	Read Replies (1) \| Respond to of 8358

R&D expenses: I saw that someone gave you the R&D expense level. What good is that??? What was the book you may have had to read in school that was about "Billy Pilgrim"? Billy could see all of time, back and forward. My calculus teacher used him as a example when trying to teach us "not to look at the single point... derive the curve" What relavence? CS R&D as a percentage of sales: 90=7.1%, 91=9.1%, 92=9.7%, 93=10.1%, 94=10.3%, 95=10.5%, 96=10.7%, 97=11%,ytd=11.9% Is this good? Not in my opinion... thanks for forcing me to look at it. It reinforces my sell thesis. CS has the feel of a company with excellent technology, at the expense of all else... sales, profits, continuity... DLJ, one of the biggest CS bulls on Wall Street, took it from their Recommended List to Neutral. The analyst believes he has been wrong thinking that CS could handle growth with its "direct distribution" model. A lot of tech firms have had great technology and failed: I have bought IBM's OS2 three times and it is great OS. It's true 32bit when MSFT-Windows is not truly 32bit (lots of 16bit still in). Nonetheless, I use Windows now because of the availability of application software. I "hate" Windows and I owned it when it was Windows 1.0 and 2.0 (back then it was OK and did what it needed to do: Did people realize all the HYPE when "Windows 3.0" was released... it was, after all, "3.0"). Anyway, I digress... DLJ believes CS need improved distribution. He also shoots down the "takeover" stories, even though he thinks Nortel should take over CS. Nortel is a CS partner, but the head of their unit that partners with CS just left 2 weeks ago. Nortel is known to be conservative and the DLJ analyst does not believe it will jump in under the circumstances. Lucent has a definative acquisition strategy and it presumably would not lead to a takeover of CS. Also, everyone I have read believes the DECnet acq. was BAD, especially since it had been for sale for a year, no takers. Back to the original thought: see the R&D going up, up, up. This is symptomatic of a tech company that has to run harder and harder just to stay in place. After the last 2-3 qtrs, it looks like CS, although putting out effort (R&D), is not even staying in place. It is falling behind! I wish I had more time, but I expect I will generate a few commments so I'll try to add more when people come back to me. Besides, I'm waiting on two Wall Street analysts to call me back. More info as I have it... I would appreciate "TECHie" feedback... I'm a numbers man: PS: The inventory to sales ratio looks horrible: It has been increasing steadily for two years. LASTLY: My most "pig-headed" portfolio manager is hesitant to sell and wants to find a reason to hold CS. This makes me believe it should be sold!