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Technology Stocks : Lucent Technologies (LU) -- Ignore unavailable to you. Want to Upgrade?

To: JOCKO who wrote (7466)	4/20/1999 4:12:00 PM
From: Mr.Fun	Read Replies (1) \| Respond to of 21876

JOCKO, Thank you for the pointer to this article. A few thoughts: 1. I believe the author is quite correct in his conclusion that Cisco faces a strategic inflection point - as coined by Andy Grove. However, I'm not sure I agree with his assessment as the key challenges of the inflection point. 2. I do not believe that Cisco really expects consumer to be a big driver of its future success, and in any case its already licensing its technology to others for this market. The CFO recently said "don't expect to see any Cisco products on sale at Frye's (a California consumer electronics store), maybe a sticker that says 'Cisco powered" but not a product that we make ourselves." They are pursuing this with Samsung for 'Cisco powered' Cable modems, so the author's suggestion to license software technology for the consumer market is old news. 3. The real inflection point is in transforming the company from one that sells data equipment only primarily to enterprises, to one that sells integrated voice/data solutions primarily to carriers. I believe that it is myopic to suggest that the challenge is primarily to increase the speeds of the existing router architecture, as the author suggests. The challenge is far more encompassing and subtle. Cisco must get up to speed a range of technologies: voice signalling, optical, network management, etc.. I believe that Cisco's approach of aggressive acquisition may be the only winning game - evidenced by the fact that all of the key competitors (LU, NT, ERIC, ALA, etc.) are playing it. Furthermore, Cisco must shift to a multi-level sales model,and position itself with a brand new set of potential customers, most of who are as mistrustful as they are intrigued. 4. The author brings up an interesting point about Intel and then drops it to chase after his uninteresting assessment of the consumer market. Specifically, today's Intel announcement about the "networking processor" raises the question: have networks become sufficiently commoditized that a single processor architecture can be competitive with customized ASIC solutions? If so, are the current price wars in 10/100 stackable and modular switches just the tip of the iceberg? LAN switching is 35-40% of Cisco's revenue base - that is a lot more important to Cisco than the consumer market. In summary, I believe Cisco faces a lot more challenges than most investors think. However, Cisco has a very deep organization of talented people, and in the end, I think they will get it right. I just don't know if anyone could manage through such a "strategic inflection point" without a hiccup. In this market a hiccup could be treated as a life threatening disease, particularly at a 60+ multiple of forward earnings on mid-20% EPS growth.