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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: Dr. Bob who wrote (14155)	5/18/1998 1:55:00 PM
From: Dr. Bob	Read Replies (2) \| Respond to of 77400

And even further reflection: Current pricing in this sector reflects the conventional wisdom that CSCO is the 800-lb gorilla, but that it is increasingly being hemmed in by LU and Nortel on the voice end, who will become King Kong and Godzilla when they pick up data networking acquisitions, and by a bunch of chimps (smart but smaller - ASND, COMS, CS, NN, FORE, etc.) on the other side, all trying to eat its lunch, and leading to shrinking margins and reduced sales growth. A somewhat contrarian view is this: LU and Nortel will have their plate too full digesting their upcoming imperative networking acquisitions to pose too much of a threat to CSCO's lunch. Remember, every large acquisition in this sector (BAY, COMS, and ASND) has gone poorly initially except for one - CSCO-Stratacom. Ironically, then, the only company which does not need a major acquisition to survive as anything other than a niche player in the upcoming New Order is CSCO, the only one which has shown is knows how to do major acquisitions well. As for those chimps - well, there will be fewer of them, when ASND and BAY get absorbed, and the ones which remain haven't gotten anything other than CSCO's crumbs recently, why should they suddenly become more successful? Rather, CSCO is going to move into their territories - COMS in particular, as CSCO has announced they will soon enter the consumer market. COMS may have to merge with Intel to survive! So the upshot is this - only CSCO controls its own destiny. IMO, every other player requires a major merger in order to compete with CSCO, and historically, those rarely go well. CSCO only needs to continue making smaller, strategic ones, which Chambers can now do in his sleep (but he isn't about to fall asleep at the wheel), and eventually, a strategic partnership, for which it will be in the driver's seat. The market is anticipating a LU/networking co. merger AND assuming it will go well. I think the latter assumption is naive, and when the Street catches on, LU will be at 50 and CSCO at 100 by year's end. All admittedly a little oversimplified, but I'm betting it's closer to the truth than the Conventional Wisdom. Bob