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

To: pat mudge who wrote (5848)	8/4/1998 2:16:00 PM
From: Tathanka	Read Replies (1) \| Respond to of 18016

Pat, Positive mention of NN at Robbie Stevens: When Nietzsche declared, "God is dead," some thought he was nuts. So when author and BancAmerica Robertson Stephens telecommunications analyst Paul Johnson says that AT&T (T:NYSE) will be out of business and MCI (MCIC:Nasdaq) is irrelevant, one might think that he, too, is out to lunch. According to Johnson, co-author of The Gorilla Game, changes in telecom technology now under way are just as significant as the 1984 breakup of Ma Bell and the advent of MCI. "The events of the next few years will determine the path of services for decades. We're at the beginning of a 20-year cycle," he said. "The events of the next few years will determine the path of services for decades." The transition from circuit-based to packet-based networks is at the heart of Johnson's argument. With current technology, when one makes a voice call, a dedicated circuit is established. That circuit stays open for the duration of the call, even during pauses in the conversation. With digital packets, in contrast, a conversation is chopped up into bursts of data and reassembled at the other end. Packet-based networks can carry a lot more information. Now, data traffic is the overwhelming voice on the world's communication systems. The problem, argued Johnson, is that circuit-based networks built over the past three decades aren't up to handling the explosion of data and demand for new services, such as video calling. "Any company that wants to be in business 10 years from now has to build a new network, a packet-based network," he said. Meanwhile, companies like Williams (WMB:NYSE), Qwest (QWST:Nasdaq) and Frontier (FRO:NYSE) are outpacing old-line telecom firms in building such networks. Indeed, Qwest will soon have more carrying capacity than AT&T. "AT&T could be out of business unless they move quickly," he said. This seismic shift in technology will also drive the development of a new generation of equipment makers, threatening established players like Lucent (LU:NYSE) and Northern Telecom (NT:NYSE). So what does all of this mean for investors? According to Johnson, the way to play this change is to buy companies successful in fiber optics, which forms the heart of the new network, such as Tellabs (TLAB:Nasdaq), which is buying Ciena (CIEN:Nasdaq), and component maker Uniphase (UNPH:Nasdaq). In switching, he favors Ascend (ASND:Nasdaq), Newbridge Networks (NN:NYSE) and Cisco (CSCO:Nasdaq). (Robbie Stephens has had an underwriting relationship with Lucent, Nortel, Tellabs and Ciena. Johnson has buy recommendations on Ascend, Cisco and Newbridge.)