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Technology Stocks : Ascend Communications (ASND) -- Ignore unavailable to you. Want to Upgrade?

To: djane who wrote (52446)	8/21/1998 2:39:00 AM
From: djane	Respond to of 61433

Networking Frontier: Data For All techweb.com August 03, 1998, Issue: 801 Section: Opinion/Editorial Vadim Zlotnikov While the deflationary impact of semiconductor overcapacity on the PC industry has clearly been overanalyzed, the implications for the networking and communications industry are less frequently discussed but equally important. The nirvana of the communication industry is ubiquitous data access-transmission at data rates sufficient to support full-motion video. Although it is interesting to ponder the societal implications of such a network, we are more concerned with the near-term transitional issues. The firming of protocol standards, a semiconductor capacity glut and increased competition are driving annual declines of 30 percent to 40 percent in the cost-per-communication port. The lower cost and increasing commoditization of enterprise networking has profound implications for the suppliers and resellers of hardware, as well as service providers. At the high end of the food chain are telecom and WAN equipment suppliers, such as Lucent Technologies, Northern Telecom, Tellabs, etc. These high-end vendors serve relatively price-insensitive markets and offer sufficient product differentiation so that lower semiconductor costs can be largely captured in the higher profit margins, rather than passed on to the end user. On the other extreme, network interface card, hub and certain switch providers have seen a significant deceleration in sales growth, from mid-30 percent to about 7 percent, despite strong unit volume, due to the need to pass on lower semiconductor prices. Lower price, however, did not cause a collapse in profit margins, as the software content of the networking gear kept products sufficiently entrenched and differentiated. This will change during the next few quarters, creating opportunities for vendors and resellers. In particular, much of the networking growth is occurring in the consumer, and small- and midsize-business markets. Unlike the major corporations-which must ensure compliance with legacy networking solutions and which are frequently unable to easily switch suppliers-smaller accounts can more easily take advantage of lower prices. This in turn will permit companies like Compaq and other PC vendors to move aggressively into some of the networking areas by undercutting the 35 percent to 50 percent gross margins enjoyed by networking vendors. Standardization of Ethernet on the motherboard will further reduce the cost-per-port and enable penetration of new markets. Since most small and midsize accounts do not have a sophisticated network administration staff, the onus will fall on resellers to develop the skills necessary to install and support a highly networked environment. If one were to take this opportunity a step further, it is easy to envision a scenario where resellers use the networking expertise and lower capital requirements of building a communication infrastructure to offer their small- and midsize-business clients outsourcing services. For example, resellers and certain PC vendors may be well-positioned to offer Web hosting, intranet outsourcing, network-compliance testing and multiple other services that will be demanded by small and midsize businesses. VADIM ZLOTNIKOV is the technology analyst for Sanford C. Bernstein & Co., New York, covering the PC and semiconductor industries. He welcomes comments via E-mail at zvadim@bernstein.com. Copyright r 1998 CMP Media Inc.

To: djane who wrote (52446)	8/21/1998 2:41:00 AM
From: djane	Read Replies (1) \| Respond to of 61433

ASND/SRA transition issues (from Yahoo thread) Message 20329 of 20447 Reply ely34 lo_t Aug 18 1998 4:04AM EDT Sorry I didn't make myself clearer (it was a Monday morning and all that!). As for the percentage of the companies workforce involved in the telco side it's hard to quantify. From what I have heard the SRA management are still trying to figure out who fits where (as in the telco or non-telco side) and this won't be decided for a while. The split is not quite as black and white as you may think. Take their engineering dept for instance. All those working with their new product (Harmony) will go to ASND (that was in the agreement with SRA). However those giving product support for the computer side will stay with the divested part. But what about those engineers that don't fit in either catagory? Is the R&D dept going to be split down the middle or is it going to the non-telco side? Then with the sales force...some are moving over some are not...and what about SRAs manufacturing facility...are ASND going to take it or leave it for the divested part?...are they going to use it to manufacture their own products?...are they going to produce their products on the same shop floor as SRA? As far as I can make out there is a bit of confusion. Back to the servicing agreements. I'm not talking about software support but hardware support! SRA have service agrrements that can last 10 years or more (remember SRA is primarily a h/w company with some s/w subsiduaries such as S2). SRA will still design and produce their products (Radio, Continuum etc.) which in turn will be used by ASND. SRA will hold the servicing agreements to provide product support. Thus if ASND have a hardware problem (in any product other than Harmony) they will have to turn to SRA. As for the divesting...word has it that the software subsiduaries of SRA will be sold off to the highest bidder and that they are looking for a "management buyout" for the computer side making it an "indepentent" company. But hey...stranger things have happened. L ps sorry if this is incoherent but it is verrryyyy early in the morning ;)