Data Networking - 13 January 1998 3 Technology and Applications Did your company purchase Ethernet LAN switches in 1997? Yes 80% No 20 If "No," do you plan to purchase in 1998? Yes 68% No 18 Maybe 5 Too soon to say 9 If "Yes," did you purchase 100Mbps switches? Yes 84% No 16 We focused on the LAN switch segment in this survey because it is one of the fastest growing data networking segments. We estimate the total LAN switch market will increase by 46% to $7.5 billion in 1998, and expect the 100Mbps segment to nearly double to $3.5 billion. This survey supports earlier research which indicates that MIS professionals are migrating to switched architectures (from shared) to meet increasing bandwidth requirements. Which vendors do you plan to use for 100Mbps switches? 1. Cisco 2. Bay Networks 3. Cabletron 4. 3Com Of the respondents that were able to identify a vendor for future 100Mbps purchases, 36% named Cisco and 25% named Bay Networks. This survey is consistent with our market share research which ranks Cisco and Bay Networks in the number one and two positions, respectively. Vendors Which data networking vendors were most improved in 1997? Why? 1. Cisco 2. Bay Networks 3. Novell Cisco leads the pack here by almost 2-to-1. Reasons cited included better pricing, good quality, better service and good new products. Bay was noted for having an improved product line, and its ATM solution was pointed out as being more robust. Also, survey respondents indicated that Bay has improved since the merger. Survey participants mentioned that Novell had solid products, and that they "finally got their act together." Which data networking vendors do you plan to increased your spending with the most in 1998? 1. Cisco 2. Not with any particular vendor 3. Bay Networks 4. 3Com Not surprisingly, Cisco leads here as well, by a 3-to-1 margin over its closest competitor. The number two response indicates that there are still a number of companies that have not necessarily aligned with a strategic vendor. [CSCO, COMS, NOVL] The securities of the company are not listed but trade over-the-counter in the United States. In the US, retail sales and/or distribution of this report may be made only in states where these securities are exempt from registration or have been qualified for sale. MLPF&S or its affiliates usually make a market in the securities of this company. Opinion Key [X-a-b-c]: Investment Risk Rating(X): A - Low, B - Average, C - Above Average, D - High. Appreciation Potential Rating (a: Int. Term - 0-12 mo.; b: Long Term - >1 yr.): 1 - Buy, 2 - Accumulate, 3 - Neutral, 4 -Reduce, 5 - Sell, 6 - No Rating. Income Rating(c): 7 - Same/Higher, 8 - Same/Lower, 9 - No Cash Dividend. Copyright 1998 Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S). 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