From: James Rogers (jamesr@best.com)
Date: Fri Dec 05 1997 - 16:32:52 MST
At 10:56 PM 12/3/97 -0500, you wrote:
>> Re: James Rogers' stock recommendations.
>
>Cisco & Intel dominate their markets. In order to grow their revenues to
>match the expectations shown by their current P/E ratios, they will have
>to grow the market itself substantially, as well as fight off competitors
>who would love to grab market share, and the associated profits.
>
>I have trouble seeing the PC market growing substantially, or Intel's
>market share (>90% ?) growing. In fact, I see signs that many people are
>buying lower cost PC's when they do eventually buy. I don't see anything
>sparking a drive towards P2's by the public, either. Windows 98 will run
>fine on a Pentium with enough RAM & HD. Excel, Word, et cetera. Quake II
>will be helped more by a Voodoo graphics card than a new processor. The
>internet, Netscape on a 56K modem certainly doesn't require more than a
>Pentium, even including all the current Java mini-apps.
Intel will make more money on increased profitability rather than demand.
While demand tends to grow slowly and relatively steadily, the real
profitability will be in the near-term decrease in competition. Intel's
aggressive price cutting has typically only occurred when faced with
competition. As soon as the competition disappears or becomes ineffective,
aggressive price cutting stops and Intel's profit margins soar. Intel will
milk current architectures for all they are worth with little investment in
making significant improvements in their bread & butter products as long as
their are no viable competitors. I believe we are moving into a period
where competition against Intel will be relatively weak.
>As for Cisco. Well, I work for Newbridge, so I'm biased. Obviously, I
>think this market will grow substantially. But, will Cisco continue to
>dominate so completely? They don't have the advantage that Intel does in
>that competitors (like Newbridge) don't have to clone Cisco products, just
>interwork with them.
Cisco has so thoroughly dominated several markets that I know of many large
corporations that won't buy anything except Cisco products, much in the
same way most large companies purchase Microsoft products for their
business desktops. In a lot of IS departments, its a matter of "No one
ever got fired for buying Cisco products" mentality. Having personally
used networking products from several companies, I don't see an inherent
superiority in most of Cisco's products, but their market presence is hard
to avoid, let alone compete with. For many people "Cisco" is synonymous
with "internetworking". Short of Cisco *seriously* fumbling the ball
(something I do not think will happen), they should remain THE dominant
company in this market.
-James Rogers
jamesr@best.com
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