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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: KY who wrote (253)	2/21/1999 1:17:00 AM
From: Tony Viola	Read Replies (1) \| Respond to of 54805

Kevin, those Boston women can be tough. ;-) Just coming up to speed on Cisco and possible competition with Lucent. I don't know the network business. There are some experts on the Cisco thread. Our sponsor and founder Uncle Frank might recruit one or two. Apologies if there are some here already. I do know that Cisco is hiring every top notch engineer in the valley, practically. Well, to not exaggerate, whenever I hear of a move of someone I know, seems they're going to Cisco. FWIW and I know that and a buck three eighty will get you, whatever. Tony

To: KY who wrote (253)	2/21/1999 12:57:00 PM
From: Mr.Fun	Read Replies (2) \| Respond to of 54805

Uncle Frank asked me to weigh in here on Cisco vs. Lucent. First, a caveat, I am not particularly enamored with Mr. Moore's Gorilla/King construct as a way to analyze company performance, but I'll try to stay within the context. Cisco - gorilla in large enterprise data networking equipment market - is finding that the food supply in its natural habitat is drying up. Large enterprise networking makes up nearly 70% of Cisco's revenues, and more of its profits. Industry growth in this arena has slowed dramatically in the last three years, from better than 40% in 1995 to about 15% in 1998. Cisco has sustained better than 30% growth from this market by taking huge amounts of market share - its share of LAN switching increased from 36% to 49% in its FY1999, largely driven by mass conversions of Cabletron hubs to Cisco's Catalyst 5000 line of switches. My basic thesis: Cisco's growth in this area will slow markedly in 1999 and beyond as prices begin to plummet, share gains become more difficult to win, and overall spending decelerates. So Cisco is looking to expand to markets where it is not a gorilla. Small businesses and households is one area - fragmented market (leader 3Com has only 25% of the market), accelerating (~25% growth), notoriously low margin and price sensative. Cisco is succeeding here, but puts its gross margins at risk. (BTW 3Com also continues to build share) The other area of expansion is the carrier market. Here Cisco does not enjoy true Gorilla status(Except in internet routers). Cisco's first play is in data technologies - true to its heritage as an enterprise data networking gorilla. However, despite Cisco's rapid growth, it finds itself behind Ascend, which has a longer list of better carrier contracts and obviously superior technical solutions. Adding insult to injury, Ascend is itself acquired by Lucent, a would-be gorilla in the carrier space. IMHO the only reasons Lucent does not have true gorilla status in carrier voice networking are 1) protectionism in foreign markets, 2) previous ownership by AT&T placed it in a great disadvantage selling to other carriers. So here's the battle. It is going to be fought on Lucent's turf. Cisco is trying to change the rules - "old world, new world" etc., but that will only go so far. Cisco will have to play the old game of SS7, hyper-reliability, etc.. My opinion? Cisco will do well in the long run, but learn some rough lessons in the near term - already it has taken its operating expenses up 300bp in girding for this major transformation of its business focus. Lucent will do well in both near term and long term. Acquiring Ascend was a master stroke which will pay huge dividends. NT will also do well, particularly in the extremely important optical arena, but maybe not quite as well as either Lucent or Cisco. European and Asian telco suppliers are in big trouble. Hope this helps.

To: KY who wrote (253)	2/22/1999 10:16:00 PM
From: DownSouth	Read Replies (2) \| Respond to of 54805

KY, The LU/CSCO situation is interesting. Its represents a point of inflection as two gorillas from two different markets (voice and data) collide as their markets converge. I think both will do fine for a while, but CSCO is the one that will grow the fastest, make the most profit, and segment the market with a "bowling pin strategy". I don't believe LU understands the concepts required to create and exploit a new market. CSCO does.