Boring Portfolio

Boring Portfolio Report
Monday, February 23, 1998
by Greg Markus (TMFBoring@aol.com)


ANN ARBOR, Mich. (Feb. 20, 1998) -- Monday belonged to the Nasdaq, which soared 24 points (+1.37%) to close at 1751.76, an all-time record. Today's new high tops by 6 points the old mark established on Oct. 9. The Nasdaq thus joins the Dow and S&P 500 in setting new records in 1988.

Smaller capitalization stocks continue to lag the major indices, however, and that's partly evidenced in the soggy performance of the Boring Portfolio. The Borefolio gained 0.35% today, basically in line with the S&P 500. Four holdings advanced, while two -- Borders Group (NYSE: BGP) and Cisco Systems (Nasdaq: CSCO) each eased $3/16.

It's way too easy to overinterpret Cisco's failure to rise along with the Nasdaq today, but it's possible that it may have something to do with a cautionary series of articles appearing in the current issue of The Red Herring.

The caveats discussed in the Herring are basically ones we've mentioned in the past and which are probably fairly well-known to Ciscophiles: the maturing router market, aggressive start-ups bringing to market so-called Layer-3 switches that transfer information packets faster and far more cheaply than traditional routers, possible confusion and disarray at Cisco as a result of its rapid growth-through-acquisition strategy and, especially, the challenges of butting heads with really big moose like Lucent (NYSE: LU) and Northern Telecom (NYSE: NT) as voice and data communications converge.

To say that these issues are well known is not at all to discount them. They're all important. If you doubt it, just call Cisco and ask them. They'll be the first to tell you that they take all of these matters seriously -- and they'll probably toss in a couple of others, for good measure. Paranoia runs deep at Cisco just as it does at Intel (Nasdaq: INTC).

Fine, but what can Cisco do about these challenges? I'm not about to speak on behalf of the Kid, but in the past the company has made it clear that they intend to meet every one of these challenges by doing whatever it takes, including cannibalizing its own "legacy" router business by offering newer, cheaper products ahead of the start-ups.

As for taking on the Lucents and Nortels of the world, Cisco has said that, as always, they prefer to seek win-win partnerships rather than engage in zero-sum battles. But if it should come to a battle, Cisco is armed and dangerous.

Just today, for example, the folks at Tasman Drive unveiled their brand new carrier-class AS5800 universal access server. "Carrier-class" means this baby is intended strictly for the big leagues, including the same regional and national telecommunications companies that Lucent and NorTel sell to.

The press release for the AS5800 reads like a "Tool Time" dream script. The new device sports "hot-swappable cards, power and blower assemblies, redundant and load-sharing power supplies, fans and modems." Telcos require this stuff so that they can keep operating even if flames are shooting out of the equipment. Cisco says the AS5800 provides 99.999% availability -- which equates to less than five minutes of downtime per year. With additional technology available from Cisco that figure can be upped to 99.99998% availability.

Finally, the AS5800 is designed to integrate voice and fax service right along with data communications, and also to permit service providers to offer various "quality of service" bells and whistles -- the equivalents of call-forwarding and caller-ID for datacom geeks.

I don't know about you, but it looks to me like Cisco isn't exactly ready to roll over and die.

FoolWatch -- It's what's going on at the Fool today.


TODAY'S NUMBERS
Stock  Change    Bid 
 ANDW  +  1/8   28.50 
 CGO   +1 1/16  29.13 
 BGP   -  3/16  32.69 
 CSL   +  1/2   46.94 
 CSCO  -  3/16  65.56 
 FCH   +  3/16  35.69 
 
                   Day   Month    Year  History 
         BORING   +0.35%   3.18%  -0.36%  25.37% 
         S&P:     +0.38%   5.90%   6.98%  67.01% 
         NASDAQ:  +1.37%   8.18%  11.55%  68.28% 
  
     Rec'd   #  Security     In At       Now    Change 
   2/28/96  400 Borders Gr    11.26     32.69   190.39% 
   6/26/96  150 Cisco Syst    35.93     65.56    82.46% 
   8/13/96  200 Carlisle C    26.32     46.94    78.30% 
    3/5/97  150 Atlas Air     23.06     29.13    26.31% 
   1/21/98  200 Andrew Cor    26.09     28.50     9.24% 
   11/6/97  200 FelCor Sui    37.59     35.69    -5.06% 
  
     Rec'd   #  Security     In At     Value    Change 
   2/28/96  400 Borders Gr  4502.49  13075.00  $8572.51 
   6/26/96  150 Cisco Syst  5389.99   9834.38  $4444.39 
   8/13/96  200 Carlisle C  5264.99   9387.50  $4122.51 
    3/5/97  150 Atlas Air   3458.74   4368.75   $910.01 
   1/21/98  200 Andrew Cor  5218.00   5700.00   $482.00 
  
   11/6/97  200 FelCor Sui  7518.00   7137.50  -$380.50 
  
                              CASH  $13182.97 
                             TOTAL  $62686.10