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

To: nihil who wrote (18357)	10/22/1998 10:00:00 AM
From: jach	Read Replies (1) \| Respond to of 77397

now, FORE coming on strong as another competitor in the Enterprise GB segment. ----------- Barron's article Fore Ready to Switch Into High Gear? By Carolyn Whelan Few stocks have slid down a more slippery slope than FORE Systems. The Pennsylvania-based manufacturer of switches, cards and other gear for high-speed networks was one of Wall Street's favorite technology stocks not so long ago. In October 1996, its share price peaked just north of 40 as investors cheered the growth prospects for FORE's switches with asynchronous transfer mode (ATM) technology. ATM uses cells to send digital traffic more efficiently than through regular phone lines. FORE's ATM products are found in both wide- and local-area networks, and it sells its switches to various telecommunications companies. Though the technology is gaining wide acceptance, competition is stiff: It ranges from Bay Networks to Newbridge Networks to the formidable Cisco Systems. As a result, FORE has had to slash prices to keep and gain market share. That has squeezed margins and occasionally caused it to report weaker earnings than analysts expected. Throw in the Asian economic crisis, some operational problems and the costly acquisition of privately held Berkeley Networks back in August, and you have a recipe for a swooning stock. After an earnings warning on October 1st, the share price plummeted to as low as 9. But at current prices, some analysts say FORE is looking attractive again. Despite the disappointing fiscal second-quarter earnings report, the company has strong new products, better cost controls, an impressive book-to-bill ratio -- in short, solid business prospects. In the first six months of the fiscal year ending March 1999, FORE posted revenue growth of 39%, which tailed off to 29% in the second quarter largely because of a product transition to a new switch that should produce strong sales later this year and next. After FORE's earnings warning, several analysts downgraded the stock. But when the shares dropped, CIBC Oppenheimer upgraded its rating to Buy from Hold, and Needham & Co. started coverage of FORE with a Strong Buy recommendation. Since the company actually reported earnings of eight cents a share for the second quarter, the stock has rebounded nicely from its lows. FORE closed Wednesday at 13 1/4. FORE's business prospects still look strong. The company said that total orders were up 30 percent, and that orders from alternative carriers -- which had been expected to decline -- remained steady. Analyst Peter Lieu of Needham foresees "awfully good" revenue growth for next year, as much as 30 percent. Better operating margins also appear likely as new products come on stream. More profitable ASX 4000 switches are hitting the market while older models are phased out. The eagerly-awaited DC Power Supply switch is now available, too. Also, some powerful Ethernet switches from Berkeley Networks -- used in networks where all lines are connected in a single link -- will ship early next year. Both promise higher prices than Fore's current LAN switch portfolio, says Peter Lieu. And since Berkeley's products work closely with the fast-growing Windows NT operating system for servers, they could make FORE a stronger competitor against industry leader Cisco in the medium-sized business market. Indeed, BancBoston Robertson Stephens called accelerating demand for ATM gear the biggest driver of FORE's growth. "ATM is currently the only technology that can seamlessly carry any kind of digital traffic -- voice, video and data," a recent report by analyst Paul Johnson says. He calls the ATM market one of the "fastest growing subsegments in the networking industry." ATM products account for 61 percent of FORE's revenues, and that percentage is growing. The strength of that business should help FORE get back on track. First Call's consensus of Wall Street analysts expects FORE to earn 46 cents a share in the fiscal year ended March 1999 and 72 cents in fiscal 2000. At current prices, it's trading at around 28 times fiscal 1999's estimated earnings. That's a slight discount to both the 31 percent projected earnings gain this year and to First Call's long-term growth rate of 30 percent. But it's much lower than the 56.5% earnings gain analysts are looking for in fiscal 2000. The shares are also trading at somewhat more than twice sales and twice book value -- a pittance for a tech stock. "I'm very optimistic about FORE," concludes Michael Duran, an analyst at Lazard Freres. He believes that FORE has good product offerings for several growing markets, and that the company has addressed some execution and product-transition problems. With those issues behind it, he says, the stock could hit 23 within 18 months. Meanwhile, rumors have been swirling around the industry about FORE as a takeover candidate -- possibly by Lucent Technologies. October 1st marked the end of restrictions on the AT&T spin-off from swallowing companies of a certain size. Spokespeople at both FORE and Lucent would not confirm that any substantive discussions had taken place between the companies. Of course, FORE is not the only possible suitor for Lucent -- nearly everyone has been mentioned. And Lucent already has ATM technology and a strong presence in the U.S., so FORE might not make the best fit. But FORE's attractive portfolio and relatively cheap stock price might still make it ripe for the picking. Industry analysts Tom Nolle of CIMI and John Morency of Renaissance think FORE would be a good prize for foreign telecom equipment manufacturers like Alcatel, Siemens and L.M. Ericsson, who would benefit from its installed base of U.S. customers and its ATM technology, which those companies lack. Betting on takeovers is always a very dicey proposition. But at current prices, FORE Systems looks attractive enough on its own. Regards Neil

To: nihil who wrote (18357)	10/22/1998 10:01:00 AM
From: jhg_in_kc	Respond to of 77397

they are not overpriced if you buy them when they are on sale. <ggg>

To: nihil who wrote (18357)	10/22/1998 10:03:00 AM
From: jach	Read Replies (1) \| Respond to of 77397

<extraordinary correlation between Dell and CSCO> yes, imo, a yr from now both will be likely half of what their stock price today. DELL from HWP, CPQ and IBM. Just look at 800$ PC from HWP, priced to kill CSCO from all these competitions that are so many to mention, and what's going to happen is that profit margin will drop. Look at what intense competition had done to the Semi, disk drive and RAM mkt segment. Look at the stock prices of these companies.