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To: Maverick who wrote (969)	1/20/1998 5:10:00 PM
From: Gary Korn	Respond to of 1629

CC cont. Entered 1997 as leader in RAS. Saw dereg, global dereg, and corps with enterprise networks. Made a strategic decision to target emerging public data networks. Chief part was to acquire CSCC. While every merger has unique challenges, integration is behind us. Core switching growth is evidence. Enter 1998 with strength and leadership in core and ras market. Aggressive hiring in targeted areas. Expanding R&D efforts. Improve cust. service and product quality. Have consolidated into 3 business units. Enter 1998 with product leadership, and strong mgmt team.

To: Maverick who wrote (969)	1/20/1998 5:13:00 PM
From: Gary Korn	Respond to of 1629

CC: NA was 73% of revenue. Carriers represented a growing portion of revenue. Strong growth in backbone market. Cont. demand for bandwitdh and svc. providers launching new high bandwidth svcs Given this background, strong growth for at least the next several quarters. Aggressive going after voice/data business, allows for major growth in NA for at least the next 4Q. Demand at 3 largest ISPs down, but carrier demand up. Expect ISP demand to increase during 1Q, as per pattern. Overseas: Intl business is flat. Japan was 5% in Q4, vs. 13% in Q3. Strength in China, major growth opp. in 1998. Strong growth in Eur. 14% up from 10%. Largely due to MAX TNT. Beginning to see backbone demand, expect modest Q1 on this.

To: Maverick who wrote (969)	1/20/1998 5:16:00 PM
From: Gary Korn	Respond to of 1629

CC: 2H of 98 should see more euro backbone growth. Bus. Unit: RAS: MAXTNT is access platform of choice in NA. In Q4, MAXTNT sales surpassed MAX4000. Also UUNET and PSI increased overall share of dial in market. In Dec., MAXTNT took top honors in some magazine. Signif. issue in 1997 was deploy of 56K modem std. To date, over 2M modem ports ship. Expect std. in next 60 days. Then, deliver free s/w only upgrade to customer. Also, worked thru s/w issues with MAXTNT. Positive feedback from customers, so this problem is largely behind us. S/W release on this to all customers in Feb. Continued to expand product line. Complete line of xDSL products integrated into MAXTNT platform. Supports T3 access, the only platform that can do this. 3 largest NA ISP soft port demand, so 43% of total revenue on this.

To: Maverick who wrote (969)	1/20/1998 5:20:00 PM
From: Gary Korn	Respond to of 1629

CC: Expect growth on RAS from ISPs and carriers in 1998 of 10 to 20%. Saw rapid market accept. of GX550. Already in beta, the GX550 allows us into the large carrier and large ISPs. This was the case with Williams. We have also cont. to enhance existing platforms. Adding FR capabilities to platforms. Strenght of RBOCS allowed us to show modest sequential growth for FR in Q4. Have relaunched GRF in NA. Don't expect rev. increase to Q2 1998. ATM demand to remand strong thru 1998, with ATM backbone of choice. Expect to retain market share leadership in FR and show ATM market share gains.

To: Maverick who wrote (969)	1/20/1998 5:22:00 PM
From: Gary Korn	Respond to of 1629

CC: Recently created Enterprise Access unit. Also, now, a corp. R&D unit. Active development of voice over IP. Also SS7 technology. Will come into market in 1998. Market is evolving at unprecedented pace. We continue to invest in infrastructure. We have been able to maintain product leadership. This allows us to make signif. headway. 1997, we turned weakness into strength wrt network mgmt. Navis is a competitive advantage. As we enter 1998, focus us (1) infrastructure of ASND, our people, (2) maintain our product leadership and (3) resume int't market momentum, as it has tremendous opportunity. Sum, I feel ASND is well positioned. We are optimistic about 1998.

To: Maverick who wrote (969)	1/20/1998 5:26:00 PM
From: Gary Korn	Read Replies (1) \| Respond to of 1629

CC: Ashby: 292.5MM rev is 8% up from prior q. RAS down 8%, ATM up 24%, etc. Svc revenue up 13%. NA sales up 12%, Intl down 2% RAS was 43 perc. Core 32pct. other Intl 27 pct. NA the rest RAS: Growth in NA from carriers and mid-size ISP. Still, slowdown in NA, growth in Euro. Continued weakness in SE Asia due to delay in TNT and Asia in general. Dont expect growth in this region in 2H at earliest. In core systems, ATM grew 75% Q over Q!!!! Very pleased for this going forward. Intl: Euro was 14% of core, up 11% or so, Asia down a bit, tho Asia excluding Japan was up a bit. Carriers represent growing perct. of business, 49% of revenue in Q4. Gross margin: 64%, same as prior q. Tho RAS is competitive, pricing remains steady. Further price reductions are likely, but won't have signif. impact on gross margins. Margins on core sys. are higher than RAS, so, as core increases, this helps our entire margin.

To: Maverick who wrote (969)	1/20/1998 5:29:00 PM
From: Gary Korn	Respond to of 1629

CC: Ashby cont. S&M still higher than we want, but getting better. Operating margin was 26%, up from prior Q. We want an operating margin in mid 20% range. Pleased with progress. We have an improved tax rate (due to tax rate investments). Improved to 36%. Fully diluted eps at 24/share, and 2/share over F.C. consensus. Cash decreased from 594MM to 577MM, due to paying CSCC merger expenses. Ongoing, cash flow positive each q. DSO declined from 79 to 72 days!!! We are comfortable with DSO in range from 70-75 days.

To: Maverick who wrote (969)	1/20/1998 5:30:00 PM
From: Gary Korn	Respond to of 1629

CC: Ashby: Employee turnover peaked at 21 pct earlier, but has dropped and is now at normal levels. Consensus in 1998 is 1.4B and 1.16/share. We are comfortable with these estimates!!!! Low single digit in 1Q and increase each Q. 1Q is traditionally slow, exasperated by Asia. We expect to see operating expense increase in 1Q, so are comfortable with .25/share. Now questions.

To: Maverick who wrote (969)	1/20/1998 5:36:00 PM
From: Gary Korn	Respond to of 1629

Q: Joseph Abelis, Merrill: Address market share. Sept surveys show ASND losing RAS market share. Why? What was Dec. trend? What doing to improve? A Bernie: That was based on revenue. In fact, market share based on ports was up to about 51%. (Q3) Can't comment on Q4. We will know when you do. Based on no major change in suppliers, don't expect us to see much change in mkt share. Hold and slight improvements in 1998 as larger ISPs gain bigger business. Q: Any new products to drive mkt share? A: Bernie: Voice to Max. Not going to provide specific timeframes now. Expect to maintain leadership in 1998. Q: Ray Concotas: GX550 revenue contribution. When will op. margins return to 20% mark. A; Ashby: GX550 revenue contribution really starts in Q2. Op margins will be mid 20 pct. range in 1998. Q: Bear Stearns, Eric Blackner: Std. for 56K...W/in next 60 days. ITU meeting in Jan. Will we have the std. then? When will you have a std compliant product, will it have multiple modems per chip, and I don't understand s/w operability issue. A. Ejabat: Mtg 2/5 in Geneva for final ITU draft, spec will be done. About 4-5 weeks for s/w to be incorporated. Change to our code is minimal, so rapid testing. The s/w change will be incorporable into existing cards. Just download from our web site. That includes every port that we have shipped at 56K.

To: Maverick who wrote (969)	1/20/1998 5:43:00 PM
From: Gary Korn	Respond to of 1629

Q: Solomon, Peter Shwartz: FR growth and RBOC activity. Also, how do we think about linearity? A: Mory: ON FR, we saw growth. By far, ATM was strongest. RBOCs want multiservice platform, so they want our ATM switch with our FR card inside of them. That is the trend. Majority of FR ports in new networks will be based on CBX500. A: Ashby re linearity: I want to improve it. Saw big improvement in 4Q and expect it to continue in 1998. Still have significant portion at end of Q. Expect revenue growth to increase each Q in 1998, so, will end up with a greater than 10% growth rate during 2H. Q: Sanford Bernstein, Paul Sigawa: S/W quality question. Why second beta test for TNT? Do any customer orders depend on this? What are specific steps to assure no recurrence? A: Mory: No customer is waiting for a s/w release. We released 1.3 last December for the customers that wanted it. The second beta was for addition of Navis. Doing some testing on it to assure compatibility. Release happens in Feb. We have added people to our test area. 1 test person per each 2 s/w engineer. So, a lot of improvement in s/w. Also increased customer support very considerably. Q: UBS Securities: Customers over 10%? On outlook, DS3 card pricing reduced 50%. Can you still grow FR in 1998 over 1997 with that? A: Ashby: Not reqd to disclose 10% cust. except on annual basis. Won't report Quartlery in future. In 4Q, they were UUNET and another WE ARE NOT PREPARED TO GIVE OUT. Both were slightly over 10%, very slightly. [COULD THIS BE ATT???] A: Mory: DS3...FR is going to T1 and higher. Deployment will not be at DS3 rate, so that is why comfort with growth in FR.

To: Maverick who wrote (969)	1/20/1998 5:47:00 PM
From: Gary Korn	Respond to of 1629

CC: Q: Everen securities: As core grows revenue, perhaps you can exceed gross margin range? A: Ashby: In 1998, expect gross margin to decline by 1 percent over full year. In a linear fashion. So, we have about 64% at end of 1997, decline to 63% by end of 1998. Due to cost reduction and improved mix. Tax rate in Q4 and for 1998 will be 36%. Q: Joel Noel, H&Q: What is your perspective on UUNET and PSI port buildout? And FR and ATM dollar revenue. A: Mory: For Q1, anticipate more port deployment at UUNET and PSI. Same as with tradition. Exact dollars of FR and ATM, prefer not to comment. Q: Chris Stix, Cowen: FR port utilization at carriers. Increasing? A: Mory: Prefer not to comment. Varies Q over Q and customer by customer. Seeing FR ports being deployed by traditional ISPs. No advantage to comment on utilization by 1 or 2 carriers.

To: Maverick who wrote (969)	1/20/1998 5:54:00 PM
From: Gary Korn	Respond to of 1629

CC: Everen analyst says: "Thanks, and congratulations for getting back on track." Q: Matt Barazowskias: Competition on GRF with CSCO and smaller companies. A: Bernie: The competition for 1998 will remain CSCO. They invest heavily. Smaller start-ups: Getting tough to break into ISPs and carriers, because have to integrate into big existing systems. So, it will stay tough for small guys to crack the carrier size ISP customers. Expect competition to remain CSCO in 1998. That is our focus. Q: Matt: Is their a growing market? A: Bernie: Absolutely growing. The GRF is a whole diff't level of performance. It is growing very, very fast. Well in excess of 100 pct. per year. Q: Robertson Stephens, Paul Johnson: Clarifying revenue by 3 major categories? A: For Q4, RAS was 125MM, Core was 124MM, Enterprise Access 28MM and service/training 15.2MM. In Q3, Svc/training was 13.4 and in Q2 was 12.7MM. Q: Michael Davis, Gutendahl Capital: GX550 positioning in carrier environment? WRT sonet. A: Mory: GX550 is a core switch into ATM infrastucture and CBX 500 is a feeder device to that. Future of GX550 is to interface to sonet infrastructure and will provide ATM functionality into the core switching. Q: Tom Erickson: Comment on core switching competition, i.e., NN and stratacom? And RAS. A: Bernie: 3COM not a factor on access cards so far. In ATM space, major competition is NN and NT for ATM, and also on FR side. Accts that use CSCO/Stratacom, difft to dislodge existing, but NN and NT on new accts is the competition.

To: Maverick who wrote (969)	1/20/1998 6:01:00 PM
From: Gary Korn	Read Replies (1) \| Respond to of 1629

CC: A: The 5300 is not making CSCO any more competitive. Q: Dillon Reed: What are migration plans for the 550 to pick up FR? A: Mory: No plans for FR into 550. It is a concentrator for 500s running FR interfaces. Q: Richard Wu: ATM growth sequentially and FR? A: Ashby: Percent. growth of ATM was greater than 75% Q over Q, won't be more precise than that. FR growth was a lot more modest than ATM growth. A: Mory: We here that beta of the NN product has been delayed. Q: Joel Noel, H&Q: Mory, you said good growth in CLEC products. What were they? A: Mory: Majority of CLEC is MAXTNT product deployment, with some opp. for GRF and FR product. A: Bernie: Some CLEC opps. are very significant. Multiple millions of dollars for a single port. Very significant. Q: Oppenheimer: You are obviously rebounding. What are your main points of optimism? Where is over 10% in 2H? A: Mory: Normally, carrier purchasing pattern is 2H. Also, some of our new products, GX550, will be 2H. Also, our DSL product line, will see some in 2H, not major RBOCs, but some of the larger CLECS. Also, some improvement in MAXTNT product line with addition of voice capabilities, in trial now. Given all, plus anticipation of far east rebound, that increases our optimism for 2H. Q: Within RAS portion, are you prepared for pricing action? A: Mory: In RAS, we are talking about price reduction in 1H or early 2H. Due to new technology which will reduce our costs. (I think this is 3 modems on a chip). Mory: Thank all of you. We will talk to you next Q. Thank you very much. DONE