<<In ATM ASND is quickly gaining ground (23% as of Q3). Its
routers are gaining momentum, having won orders from UUNET (a long-time customer of just CSCO routers) this Fall. ASND competes to no significant degree in any other areas against CSCO...so with all this in mind, where is the roadkill?>>
>>>That not what the Dec 9 Red Herring reports:
He also points out that UUNet, one of Juniper's
backers, just signed a contract to use Cisco's
high-end routers for the next year. "I think it shows
that [Juniper] isn't ready for prime time," he says.
Maybe, but we'll tune in next year.
herring.com <<<
In regards to my statement that ASND's GRF routers are gaining momentum and have won a significant contract from UUNET this Fall.
I think the Red Herring may be referring to a different class of routers and/or a different contract entirely. There is no doubt that CSCO is, and will remain to be, the chief supplier of routers to UUNET for at least the next few years, but what IS significant is that CSCO was, until now, the ONLY supplier of routers to UUNET. Here is a quote from MS Investor (I managed to find the article again):
--> Elevating its standing among competitors building Internet infrastructure, Ascend is developing its next-generation ATM switches capable of 25 gigabits per second throughput -- that's 25 billion bits of data per second. In addition, Ascend's router offerings -- the GRF 400 and GRF 1600 -- have been gaining momentum in the market, as can also be seen by the recent UUNet announcement to integrate the GRF into UUNet's internet network.
Cisco has long supplied UUNet with routers. This contract was won apparently because Ascend had developed market-ready, speedier routers before Cisco. Cowen's survey data and industry sources suggests Ascend could capture about 6% to 8% of the speedier router market share among Internet service providers in the near-term -- no "Cisco killer" by any stretch, but nevertheless a profitable product line with further upside. The integration of Sahara ATM technology, a Cascade acquisition, is also on the horizon. <--
investor.msn.com
So even though this does not threaten CSCO's monopoly in routers to any great degree, it is still bullish for ASND.
>>> I haven't found any research which maintains that ASND is any threat to Cisco while I have found a surfeit that projects Cisco as a grave threat to ASND in markets it once had to itself (remember Chambers has stated Cisco will be #1 or 2 in each market it enters).<<<
That's true, ASND is no current threat to CSCO -- other than to keep it from dominating the RA/FR/ISDN/ATM markets, therby impeding the leading networker's future growth as router sales slow further.
I can't in any way ignore the fact that CSCO will steamroll ASND if the company stands still and does not move to prevent this from happening. But that's just it, from what I know about ASND's business, strengths, strategies, and technology, ASND does not have one foot in the grave. It still is very successful, fundamentally strong with a great balance sheet, leads 3 sub-sectors in networking, and most important of all -- it has the technological lead in the niches where it specializes. CSCO is generally new to these markets, and ASND has the advantage of leading market share, strong long-term relationships with the ISPs and telcos, and also (for the time-being) the most superior and extensive end-to-end portfolio for Internet/telco networking. ASND management does not underestimating the CSCO threat. But they still have a couple years before CSCO's mass gains inertia in their market segments -- if they play their cards right, and most importantly don't take their eyes off the ball (CSCO), then they will remain the leader in RA/FR and ISDN...maybe ATM, soon.
My point is, the game has just begun, and right now ASND is a fantastic value for the risk-concious/tolerant investor. Definately not a long-term hold (years), though...it's way too volatile. When it comes to a company like ASND, it's best to buy on the down-cycles and then hold only until everyone is warm and fuzzy again. Of course, that's just how I would play it as an intermediate-term.
As for Chambers...I remember that interview. He did say his *goal* was for CSCO to be at least #1 or #2 in every market segment. But it is ASND's intentions to remain #1 in its segments, and CSCO will also have to contend with COMS -- it's my guess that those two will be fighting for 2nd and 3rd place in RA/FR.
>>>And I think the buyout rumours/hopes (and of course, the collapse in its stock) are more than endorsement of that fact. They are the starkest confirmation.<<<
I always leave the possibility to a buyout, open. But I never let such speculation cloud my investment strategy -- that would be foolish. If you take a look at my posts on the ASND thread, I attributed most of the appreciation 2 weeks ago to the outcome of the DMG conference, which was very bullish. The LU rumor added some fuel to the fire, but the institutional accumulation of the shares (evident from the block-size trading data we were tracking) could not have been attributed to such gambling. Rumors are good for day trading, and that's about it, in my opinion.
As for the collapsed stock, that is unfortunate for those who bought at high levels, but for those who bought in the 20s, they greatly reduce their risk and their potential reward is fantastic for 1998. I wish I could have called the bottom, but I didn't...so I'm down 20% as of today. Which isn't too bad, considering the market...and all ASND has to do is hit 50 sometime in 1998 and I can make a handsome 50% on my money. ASND has no debt, just under $600 mil cash, leading market positions, great new products in the pipeline, CSCC is hot, and the 56K standard is on its way finally. Things are looking up -- CSCO won't destroy ASND in 1998...after that, if it gets too bad, the company will probably be aquired. But hey, I won't own it, so it doesn't matter to me...I'm looking at this from an investing perspective.
I believe what it comes down to is our two very different investing philosophies. Compare your favorite stocks to mine...it's very evident there.
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