TECH TALK
By Paul Motter (TMF DotCom)

NEW YORK, NY (June 5, 1997) -- It was a great while it lasted. Networking stocks had a brief revival in May that seemed to signal the end of a protracted period of near-panic selling based on the perception that technology as an industry was nearing a phase of slowing growth. Well, based on what we have seen this week, maybe they were right, in a sense, but let's not throw the baby out with the bath water.

Okay, we can identify segments of the networking market that are slow compared to previous quarters, but to worry that the march of technology is actually slowing down is ridiculous. If anything it is like the ocean. Waves come in and waves go out. As waves go out, they affect the momentum of waves coming in.

We are seeing a slowdown in various segments of the networking sector for different reasons. CABLETRON SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CS)") else Response.Write("(NYSE: CS)") end if %> and BAY NETWORKS INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAY)") else Response.Write("(NYSE: BAY)") end if %> were both recently downgraded by analysts after they warned us that they would not meet their expected quarterly estimates. Two recurring themes have been sounded in these warnings from tech companies (including Intel). The first is a slowdown in sales from Europe. The dollar is strong overseas right now, and that could definitely affect sales.

But what seems to be happening to the technology sector in a less macro sense is a transition period where we are seeing the slow obsolescence of some technologies as newer ones slowly begin to gain acceptance. It always seems to happen in our field that when a new technology emerges, the excitement surrounding it leads to an anticipation that is seldom justified by the actual rollout. It takes time for customers to change their networking style no matter how good the new technology is. There are great new technologies that are widely anticipated, but the transition has to be measured carefully. It is like those ocean waves where a receding wave hits an incoming one and slows down the momentum.

For example, look at the advent of ADSL implementations. Ever since the early days of Amati Communcations and Paradyne we have been eagerly anticipating the onset of highspeed telecommunications directly into our homes at a reasonable price. The technology (hardware) is commercially available, but getting it into the marketplace has now become the hurdle. Blame the telcos, they simply are not convinced the customer wants it badly enough to offer it at a reasonable price. It is a question of economics to them; the concept of "build it and they will come" does NOT apply. Because of this situation, the growth in older technologies continues to grow. ISDN is projected to grow by 85% this year, 56k modems are poised to have a great year as well.

Another transition that is farther along is that from "shared" media ethernet ( good old 10base-T hubs) from companies like Cabletron to the newer LAN Switches from people like 3COM <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: COMS)") else Response.Write("(Nasdaq: COMS)") end if %> and INTEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %>. Switching has been around for three years now and couldn't be easier to implement for a LAN administrator, but only now are we really beginning to feel the pinch in the shared media market.

The bottom line in all this is that technology marches on, but sometimes it coasts downhill while at other times it is stuck in the mud. We all know where it is heading; fat pipes into the home, video on demand, teleconferencing; secure websites, electronic transactions, remote worksites, etc. But the pace of change is what we have to watch carefully as investors. We need two things: the ability to sniff out the true technological innovations that will create lasting changes; and the confidence and patience to see them through.

US ROBOTICS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USRX)") else Response.Write("(Nasdaq: USRX)") end if %> and IBM <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IBM)") else Response.Write("(NYSE: IBM)") end if %> announced last week that IBM Global Services has implemented the largest deployment of x2 Internet and intranet services to date by a single Internet Service Provider (ISP). This came one day after an announcement by US Robotics that it would guarantee a free upgrade to whatever the 56k modem standard (as to be set by the ITU early in 1998) becomes, even if it requires a hardware upgrade. This is a good move by US Robotics that takes a lot of the worry about expense away from the somewhat reluctant ISP market when it comes to implementing 56k.

AMERICA ONLINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> announced a settlement with customers whereby they will offer free time to any users who were not able to access the network during the peak months of December and January. Basically, they are offering anywhere from half a month to two months free based on the number of hours any customer actually spent online during those months. AOL's stock price is continuing to climb based on the perception that the company's toughest days may be behind them. A renewed vigor in advertising and cost cutting measures internally has the market taking notice.

ASCEND COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %> introduced its second-generation IDSL, a version of *DSL which can be transmitted via standard ISDN hardware, which makes it possible to support analog voice and fax over single pair copper wire facilities at a speed of 128 Kbps. This software upgrade is available for Ascend's IDSL line cards for the MAX 4002, MAX 4004 and the Pipeline 25 and Pipeline 75 CPE products. No new hardware is required. Support of analog voice and fax for the faster 768 Kbps SDSL (Single Pair HDSL) service will be available later in 1997, according to the company.

Ascend is shipping its Rate Adaptive Asymmetric Digital Subscriber Line (RADSL) card for its MAX TNT central office equipment (COE) and a corresponding DSLPipe-C for customer premises (CPE). RADSL can transmit data downstream from the CO to the subscriber at 7.0 Mbps and transmit data upstream at 1.0 Mbps over distances up to 10,000 feet. Speeds of 1.0 Mbps upstream and 2.5 Mbps downstream can be achieved over distances up to 12,000 feet. The products extend Ascend's MultiDSL family, a fully integrated multi-service platform of DSL technologies.

``Demand for our Multi-DSL products has been overwhelming,'' according to Richard Sekar, product manager for high speed access products at Ascend.

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