ANN ARBOR, Mich. (April 15, 1998) -- The Boring Portfolio continued to move ahead Wednesday, with five of seven holdings in the plus column. Leading the pack were our "tech" holdings: Andrew Corp. (Nasdaq: ANDW) and Cisco Systems (Nasdaq: CSCO).
Andrew rose $1 11/16 on the bid, or nearly 10%, to $21 7/16. Trading volume was heavy. Tomorrow morning, the company will be reporting results for its March quarter, and possibly some traders have taken up positions ahead of the news.
Cisco soared $3 to $70 11/16. As reported here yesterday, a couple of Cisco's high-end switches were involved in the glitch that brought down AT&T's (NYSE: T) frame relay data network Monday, blacking out automatic teller machines, airline reservation terminals, and grocery store cash registers across the nation for hours.
It's not known yet whether the root cause of the problem lay in the switches themselves or elsewhere in the system. In any event, it probably wasn't a day that Cisco will want to revisit soon.
The silver lining to this dark cloud is that the outage demonstrated vividly the degree to which even the most mundane businesses have come to rely upon data networks to conduct their operations. Credit card transactions, inventory information, customers' bills, and much more all zip at the speed of light through data networks that scarcely existed a decade ago. Already, the volume of data traffic far outstrips that of voice traffic across telecom companies' networks, and the volume continues to grow, rapidly. Being the undisputed king of networking, Cisco benefits greatly from this trend, however much the company may have been embarrassed on Monday.
I listened to the taped replay of AT&T's conference call with news media regarding the outage. On it, AT&T executives estimated that "thousands" of companies were affected by the outage, and each of those companies in turn may have hundreds or even thousands of separate places of business. Asked by one reporter to quantify how important these frame relay services are for Ma Bell, chairman C. Michael Armstrong replied that it's a $1 billion a year business, growing at more than 30% annually.
More than thirty percent.
I also listened last night to a replay of Intel's (Nasdaq: INTC) conference call following its quarterly earnings report. (You can listen to the replay right at Intel's website, by the way. What a country.)
The challenges with which Intel must cope right now -- great company that it is -- seem to me to stand in sharp relief against the extraordinary opportunities facing Cisco. For that matter, the prospects for even the mighty Microsoft (Nasdaq: MSFT), slated to release Windows 98 in a couple of months, arguably can't compare with those of The Kid.
What the world needs now -- what the world demands now -- is not so much a next-generation desktop microprocessor that is marginally speedier than last year's model or a New! Improved! desktop operating system that lets you custom-color your scroll bars or plays background music while you type. What the world needs is bandwidth, connectivity. Lots.
I have no idea how Cisco's business will fare in the next three weeks or next three months. I have a pretty good idea what its trajectory will be over the next three years.
As for tomorrow, it's Andrew, Carlisle, Pentair.
Stock Change Bid ANDW +1 11/16 21.44 CGO + 1/8 36.38 BGP + 3/8 33.06 CSL -2 48.88 CSCO +3 70.69 FCH - 7/16 35.25 PNR + 3/16 44.31
Day Month Year History BORING +0.77% 0.15% 1.85% 28.16% S&P: +0.32% 1.59% 15.34% 80.06% NASDAQ: +1.10% 1.50% 18.65% 78.99% Rec'd # Security In At Now Change 2/28/96 400 Borders Gr 11.26 33.06 193.73% 6/26/96 150 Cisco Syst 35.93 70.69 96.72% 8/13/96 200 Carlisle C 26.32 48.88 85.66% 3/5/97 150 Atlas Air 23.06 36.38 57.75% 4/14/98 100 Pentair 43.74 44.31 1.30% 11/6/97 200 FelCor Sui 37.59 35.25 -6.23% 1/21/98 200 Andrew Cor 26.09 21.44 -17.83% Rec'd # Security In At Value Change 2/28/96 400 Borders Gr 4502.49 13225.00 $8722.51 6/26/96 150 Cisco Syst 5389.99 10603.13 $5213.14 8/13/96 200 Carlisle C 5264.99 9775.00 $4510.01 3/5/97 150 Atlas Air 3458.74 5456.25 $1997.51 4/14/98 100 Pentair 4374.25 4431.25 $57.00 11/6/97 200 FelCor Sui 7518.00 7050.00 -$468.00 1/21/98 200 Andrew Cor 5218.00 4287.50 -$930.50 CASH $9251.26 TOTAL $64079.39