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Strategies & Market Trends : The Thread Formerly Known as No Rest For The Wicked -- Ignore unavailable to you. Want to Upgrade?

To: Junkyardawg who wrote (3745)	12/23/1998 10:55:00 PM
From: Glenn	Respond to of 90042

Xylan note of interest from microsoft investor: Xylan: Where are my steel mesh gloves? Over the years, people familiar with my investment style know I'm periodically fearless when it comes to catching falling daggers. Quite simply, there are cases where the market is anything but efficient. This is particularly true when it comes to shares of small companies. I believe we are seeing a market inefficiency in Xylan (XYLN). From what I can gather, its recent pullback is due in part to a mutual fund that dumped holdings on Wednesday. When it comes to the fundamental backdrop of the stock, there has been ongoing concern that Xylan's sales will suffer as some of the networking company's largest original equipment manufacturers reselling Xylan's switches experience sluggish sales. IBM (IBM) and Alcatel (ALA), as Xylan OEMs, accounted for 31% of revenue in Xylan's last quarter, so the risk is real. However, non-OEM sales are extremely robust. With strong products and distribution, Xylan generated about 25% sequential growth in third-quarter revenues from non-OEM customers. In my book, Xylan is a strong buy. The company's fundamentals are solid. Revenue and earnings growth, relative to the stock price and the company's networking industry peer group underscore the potential for the shares to trade beyond $30 in 1999. The company is small, and the general networking industry trend favors the giants like Cisco Systems (CSCO), vendors that can offer customers "one-stop shopping." But Xylan is a technology leader. At some point, if the stock remains as low as it currently trades, I believe the company might be a takeover target.