MRVC update
Another Van Kasper update:
MRV Communications * (NASD: MRVC $23 5/8, Strong Buy) Price Target: $40
- Yesterday Juniper Networks, Inc. (NASD: JNPR, Not Rated), announced that it has made a "significant"
investment in MRVC's New Access subsidiary. Juniper also disclosed that its cofounder and Chief Technology
Officer, Pradeep Sindhu, would take a board seat with New Access. We believe this announcement is just the
lemon next to the pie and will have multiple positive implications for investors in MRVC and its
subsidiaries including:
1. Validation of New Access's and MRVC's technology.
2. Affirmation of MRVC's commitment to its "pureplay" monetization strategy of New Access and its four
other subsidiaries ( Optical Access, Charlottes Web, Zuma Networks and Hyperchannel).
3. Increased probability of market penetration New Access's optical solution, given Juniper Networks
solid business relationship with major carriers and Internet service providers such as MCI/Worldcom
(NASD: WCOM, Not Rated) and UUNet.
-It is our opinion that this announcement is among the first of many announcements to be disclosed over the
next several quarters regarding significant partners, beta sites with major service providers, additional
talent and IPO filings. More importantly, we believe, as does some other "smart money" (i.e. Juniper
Networks), that these "announcements" will lead to sell through over the next year.
- As we stated in our initial report, we estimate that each of MRVC's five high margin next generation products has
the potential to add $25 million to $50 million of revenue in F2000. Given today's market valuations of companies that
have the potential to produce $125 million to $250 million of internet backbone equipment revenue, such as Juniper,
Redback(NASD: RBAK, Not Rated), Extreme Networks (NASD: EXTR, Not Rated), Alteon (OTC: ALTNC, Not
Rated) and Foundry (NASD: FDRY, Not Rated), the hypothetical "success" price of $202.82 per share ($6
billion market cap.) for MRVC shares that we listed in our initial report has become a middle of the road
valuation.
- We reiterate our Strong Buy recommendation with a 12-month stock price of $40 per share.
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