Post of the Day
May 11, 1999

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Subject: Re: ibm of this decade
Author: PrefertoLurk

billylogal said:

"These newcomers sold us on the reality that Cisco has for all intent and purpose a monopoly, and that though competition is ever present, it is all comparable to Apple trying to catch up to Microsoft in the late 80's. With one crucial difference. Apple (of course forever argueably) had initially a far superior product. Not the case with Cisco competitors. My investment partners, who work constantly with routing equipment, as well as several friends doing communications work in the U.S. armed forces, all swear allegience to Cisco products."

Congrats on your successful investment in Cisco, however I think you (and your friends) need to learn some more about the telecommunications industry.

The only area that Cisco has "for all intents and purposes a monopoly" is in the router market. If you read the market research reports, you will find that growth in this market has flattened out. Where are the new profits going to come from to continue to justify the massive ratios that CSCO trades at ?

The answer is the Carrier market. However, Cisco is a virtual NOBODY in that space, with Lucent, Nortel, Alcatel, Siemens and Ericsson being the giants. Cisco has no experience with voice, or building massively scalable and incredibly reliable networks. Don't get me wrong -- Cisco will be a player in this area but they will not achieve anywhere near the market dominance that they did in the (enterprise) router market.

The telecommunications market is undergoing a paradigm shift as "Voice" and "Data" collide. Cisco's advantage in the data arena is offset by its shortcomings in voice capabilities. Sorry, but if you really believe Chamber's tripe about "New World" technology and that "voice will be free" in the near future then you have fallen prey to a marketing ploy. Ditto to the concept that "Cisco is the Internet" -- CSCO could cease to exist tomorrow and there are companies that could easily step up and fill the void. Just because the Internet is growing by leaps and bounds does NOT mean that Cisco is the only one that is going to supply the infrastructure.

It's a new playing field out there and Cisco no longer stands as a gorilla when you consider the whole telecomms industry, instead of just one small segment. When you consider the spectrum of Telephony, IP/Data, Optical Networking and Wireless you will find that there are other companies better positioned than CSCO.

Don't get me wrong, Cisco is a great company that will continue to grow. However, I don't believe that it warrants such an incredible premium to its competitors. What will happen when they "miss a quarter" (a la DELL)? It could be an awfully long fall from such a lofty height.

I now return you to your normal programming...