Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Newbridge Networks -- Ignore unavailable to you. Want to Upgrade?

To: Doug who wrote (5137)	6/13/1998 12:54:00 PM
From: Andrew	Read Replies (3) \| Respond to of 18016

Doug, "I am quite keen to understand how NN plans to increase its revenue. They have 2 options. A further cash buy out of another allied Networking Company with strong cash flow and/or a revamp of their Sales strategy." "Based on this, the probability to increase Packet switching revenue by 30-40% is small" I just want to point out that there is evidence to support excellent growth even without more "blockbuster" design wins. The big run-up last fall was fuelled largely by several massive wins announced around september, including BT and MCI. As usual, this runup was taken too far - and when people didn't see immediate earnings jumps, combined with the TDM and UB Networks debacles, a selling frenzy took place. The silver lining behind this is the fact that those contracts are now going to start appearing in the company's results. Remember, these were long term contracts. People are so short-term focused that they assumed they would get immediate gratification. Now, the market has already forgotten about those wins - even before they start to matter! The fact that those two giant companies have decided to go exclusively with MainStreetXPress as their long-term packet strategy provides a solid basis for future packet growth at NN. AT&T, and the other smaller wins round out the case. Other evidence includes the fact that the huge installed base of TDM customers will continue to favor Newbridge for network enhancements - i.e. packet revenue. I acknowledge that TDM slumps and the UB networks charge-offs have made the past year look very ugly. But underneath the surface, the ATM performance has been chugging away, and is in the process of bursting out to become the dominant factor in NN's results. Technology transitions can be very ugly. It's important to focus on the value of what they are transitioning to, not the transition itself. So on that note, long term investors should worry about: 1. Is NN retaining it's competitiveness in the ATM WAN? 2. Since WorldCom (with it's ASND installed base) bought MCI, is NN's future at MCI compromised? 3. Was MPOA the right choice, or will MPLS catch them off-guard? 4. Can ATM work it's way into Gig-Ethernet's domain? 5. Can the salespeople explain that ATM complements IP, rather than competes with it? Here are some things that make me worry less: 1. IP and Gig-Ethernet do not have satisfactory "hooks" in place for the Quality Of Service (QOS) requirements of mission-critical data. ATM does and is compatible with both. 2. Newbridge has established alliances with big companies that not only fill in the holes in their catalog, but also have a great deal of marketing muscle and a huge installed base of customers (Siemens, 3Com) 3. Newbridge has some "quality cache" due to their telecom rather than enterprise heritage. 4. With a lot of their cost structure in Canada, NN has a currency advantage: they can price their products lower, easier than US-based companies. 5. While the lure of lower taxes and higher pay does suck some talent down to Silicon Valley, many people prefer to stick with the Canadian "quality of life". Also, many people don't want to move that far from home. Canadian universities churn out a lot of quality engineers, and the only really big competitor for them in Canada is Nortel. So Newbridge has a access to a steady stream of new talent, and faces less problems of attrition of "key" brains. I'm not saying NN is a no-brainer, or that all my arguments are iron-clad, just that there are compelling reasons to believe NN will resume it's growth trajectory. Andrew