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Technology Stocks : BAY Ntwks (under House) -- Ignore unavailable to you. Want to Upgrade?

To: Paul Fine who wrote (5101)	4/5/1998 6:04:00 AM
From: rupert1	Read Replies (2) \| Respond to of 6980

Paul: I would never argue against caution. In weighing your opinion I have two main thoughts. The SV downgrade has affected you more than the BAY opinions delivered in the CC with analysts three weeks ago when you said that most of your fears had been alleviated and you were cautiously optimistic about the 4th qtr. I can only assume that the SV opinion found fertile ground in you because, despite the strongly positive tone of the CC, the BAY warning which preceded it has undermined your confidence in the credibility of House and management. In particular you seem to have been greatly affected by the de facto mind-share dominance enjoyed by CISCO. You will remember that House said that BAY is winning in certain Cisco situations - but that will not be comforting if you have lost confidence in House or in the general theory that BAY can prosper alongside of Cisco. The question is whether this disillusionment is well-founded. One should be able to believe what a company tells its shareholders two or three weeks before the end of a quarter; if not, then one should not be in the stock. Some of your supporting arguments appear a little weak. When BAY went to below $16 it was a company in radically different circumstances. I will not elaborate - those interested will know what I mean. Also, it did not stay in that range very long and moved up strongly first to the 26-29 range and then, up to 41. As for BAY never having only one bad quarter - they have not had a bad quarter for four quarters, this quarter is not going to be a bad quarter (it is just not going to be as unusually good as BAY had hoped) and you have no evidence, apart from the SV guy's speculation, that there will be a bad quarter next. On the contrary, you have projections from informed analysts and from the company that the next quarter will be very strong. I find your suggestion unconvincing that because sales of Accelar were not outstanding in this quarter (and we don't know what they were, yet) there is no reason for them to be in the next. A new product has a lead time. This was a seasonally weak quarter for all the reasons discussed by the company, there is the problem of manufacturing, in situ trials, and the sheer logistics of sales. Surely the company has a better grasp of the sales it can expect from a new product over the 3rd and 4th quarters combined than over a portion of the 3rd quarter. Your separate theme that Cisco may be a better investment should take into consideration BAY's presently depressed price as opposed to Cisco relatively elevated price (even allowing for the perceived dominance premium). Personally, I invest in Cisco from time to time, when I think its price is reasonable. I have a large position in BAY, not as large as it was a few weeks ago. I will buy or sell as information becomes available. While I appreciate the SV "warning" in that it highlights a certain relatively low risk danger for the share price (he recommended "hold" at $27), I do feel frustrated when analysts cannot support their warnings with verifiable data. If BAY does better than he says and the share price goes up, nobody will hold him to account. As you said in a previous post, you pays your money and makes your choice (or words to that effect). Do you believe House and his officials or do you believe SV? The major mark against House is that he has admitted that he cannot fulfil his ambition to have this quarter buck the traditionally seasonal slowness despite the new products, which have sold more slowly for manufacturing ramp up and other factors enumerated. Will you be offering us your usual enumerated estimate of what the earnings will be - which I always find interesting, or do you think it is all too obscure? Regards Victor

To: Paul Fine who wrote (5101)	4/6/1998 9:10:00 AM
From: Doug	Read Replies (1) \| Respond to of 6980

Paul:That was an excellent appraisal of the situation.Irrational as it may seem the market is willing to pay for margin and sustained growth. Whilst technical discussions and concerns of micro details are interesting and lead to voluminous exchanges,they have not moved stock prices. Looking back, the correct call was to have sold BAY at $35. Admittedly no one can call the exact the top. However, the facts are the majority called for $45-50 by May/June. A postmortem analysis will show that the consensus was way off both in price and timing. The odds are that the price expectations of the street for the next Q is far lower than those expressed here.