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To: Sector Investor who wrote (6935)	2/3/1998 11:36:00 PM
From: Eric L.	Respond to of 42804

smartmoney.com Smartmoney on Csco's being vulnerable in its glacial switch out of out-dated routers to layer 3 switching (pun intended of course<g>) and how this benefits competitors. I thought the highlights were: A new product by rivals Bay Networks (BAY) and 3Com (COMS), known as a Layer 3 switch, is threatening Cisco's bread-and-butter business of routers. Cisco built its industry domination on routers, a software-laden networking application that plays traffic cop to data streams. Routers contribute about 40% of Cisco's $6.8 billion in revenues, as well as juicy gross margins, estimated at about 65%. The Layer 3 switch, which Bay boasts to have 10 times the performance at one-tenth the price of a router, is vying to replace a good deal of these $100,000 machines' functions. "Layer 3 switches are basically the remaking of the traditional routers," says industry watcher John Armstrong of San Jose's Dataquest. and And if router functions are migrating toward microprocessors, you can bet that Intel is not far behind. "Intel has quietly been assembling a fairly good product line. Now they have to step up to the plate with enterprise-level solutions," says Dataquest's Armstrong.