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To: cAPSLOCK who wrote (14369)	3/9/1998 4:13:00 PM
From: jim bender	Read Replies (1) \| Respond to of 45548

Cisco Sees Slower Growth Rates (03/09/98; 12:06 p.m. EST) By Larry Dignan, TechInvestor In a filing with the Securities and Exchange Commission Monday, Cisco said it sees slower growth rates as sales to small- to midsized businesses outpace its high-end products and Asia remains a question. Cisco [CSCO] reported strong second quarter earnings, but is in a traditionally slow quarter, where backlog is reduced. Wall Street is expecting the San Jose, Calif., networking giant to report third quarter earnings of 44 cents a share. "The company expects that in the future, its net sales may grow at a slower rate than was experienced inprevious periods, and that on a quarter-to-quarter basis, the company's growth in net sales may be significantly lower than its historical quarterly growth rate," Cisco said. "In recent quarters, the sequential sales growth has slowed from prior levels, and a disproportionate share of the sales has occurred in the last month of the quarter. "The sales growth rate for lower-priced access and switching products targeted toward small and medium-sized businesses has increased faster than that of the company's high-end core router products," the company said. "These products typically carry lower average selling prices, and thus have slowed the company's growth rate vs. the second quarter of last year. Some of the company's more established product lines, such as the Cisco 2500 product family, have experienced decelerating growth rates." In addition, Cisco forecast slower sales in Asia, but said the company hasn't been hurt by the financial problems abroad yet. "The company anticipates sales in Asia will remain weak in the near future," Cisco said. "If the economic conditions in these markets worsen, or if these unfavorable conditions result in a wider regional or global economic slowdown, this may have a material adverse impact on the company's business, operations, and financial condition. The company continues to monitor activity in the region closely," the company said. Europe could also be a problem for Cisco, the company said. Cisco said it recently expanded its operations in Europe and "expects to see an increase in exposures related to non-dollar-denominated sales in several European currencies." The company said it will hedge currencies to minimize fluctuations.

To: cAPSLOCK who wrote (14369)	3/9/1998 8:04:00 PM
From: Mang Cheng	Read Replies (2) \| Respond to of 45548

An interesting article stating that the business model of cpq trying to do everything herself is flawed. CPQ is trying to be everything and ends up good at nothing ! ****************************************************************** "A SILVER LINING IN TECH" - SmartsMoney DON'T PANIC! It's just the end of the tech sector -- or so it seems. The broad selloff in technology stocks following last week's dismal earnings pre-announcements by Compaq Computer (CPQ) and Intel (INTC) has had a back-draft effect, pulling down prices for tech stocks across the board. But rather than run for some defensive sector like consumer products or drugs, why not do a little bargain hunting. One sector in particular that may have been wrongly implicated during Monday's carnage is the community of contract manufacturers -- Jabil Circuit (JBIL), Solectron (SLR), Flextronics International (FLEXF), Smart Modular Technologies (SMOD), Adflex (AFLX), and DII Group (DIIG). All of them dropped more than 5% Monday in the 28% Nasdaq plummet. These companies are paid by PC makers and other computer equipment vendors to assemble various parts of their finished products on an outsourcing basis. It's all part of what analysts are calling the "battle of the supply chain," where speed to market is the key ingredient for success. "You want to grow from raw materials to cash as fast as possible," says Cowen & Co. analyst Robert Stone. And if using an outside contractor helps you build parts more quickly, then you'll pay up for the privilege. While it comes as a jolt for the whole market, Compaq's news last week actually highlights the growing opportunity for contract manufacturers. The truth is, as companies like Compaq and Hewlett-Packard (HWP) struggle to emulate the success of Dell Computer (DELL) and its build-to-order model, they'll need all the outside help they can get. Analysts are now pointing to the foolishness of old-style inventory management. They note that Compaq had to stuff its distribution channel full of inventory to puff up its fourth quarter numbers, only to suffer shelves of expensive unsold inventory in the first and second quarters of this year. The key to reducing that inventory, analysts say, is to foist some of the manufacturing responsibility onto outside companies. Stone points out that Compaq manufactures 80% of its circuit boards in-house, whereas Dell, the leader in build-to-order, has no in-house circuit board assembly. Switching to the Dell model, he says, would save Compaq millions. How do the contract manufacturers make it work? Consider the case of Smart Modular, which manufactures memory subsystems for Compaq computers. The trick is that Smart Modular's systems are installed by Compaq's distributors only after a PC is ordered by a customer. That means even if Compaq stuffs the channel, it doesn't matter to Smart Modular. The contract manufacturer benefits from each PC sold to an actual customer, not from machines sold to a distributor. Of course, an overall slowdown in PC demand crimps sales for everybody. But so far, there are more signs of pricing pressure than weak unit demand. Stone says the quarterly reports that will come from these companies in the next couple of weeks may reflect some sluggishness, because many PC buyers are holding off purchases until after April when new technology comes out. But he's bullish on the rest of the year. Besides, many of these companies are far from dependent on the PC market. Jabil Circuit, for instance, gets most of its revenue from networking companies like Cisco Systems (CSCO) and 3Com (COMS). Yet its stock plunged 12% on Monday and now trades at 18 times 1998 eranings estimates, despite the company's 31% projected long-term growth rate. J. Keith Dunne, an analyst with BancAmerica Robertson Stephens, points out that Adflex -- which earns the bulk of its revenues from consumer electronics and communications products -- also got hit unfairly. It's trading at only 10 times forward earnings after today's drop. Given that there's still plenty of volatility in the market, Stone recommends waiting until the first-quarter earnings season passes before jumping into the contract manufacturing arena. The stocks are cheap, but any softness in the first-quarter numbers could make them even cheaper. "Don't make the mistake of evaluating these companies based on sentiment about their customers," Stone says. "Look at their fundamentals, which are good for the next 12 to 18 months." -- By Tiernan Ray Mang