So what happens if JDSU gets added to the S&P 500, which we would all expect sometime given their importance in the information technology arena?
Whether you feel the market cap is 34 billion or 47 billion, upon inclusion into this index could lead to an instant buy order of 10 million shares which we kill all the shorts in quick time. However, I think they will pull a Q and issue a secondary to satisfy the funds and build a warchest for additional acquisitions. They have an opportunity to harm the gorilla Cisco with the sword they (JDSU) wield. That's why you see the urgency in Cisco trying to leverage their stock to acquire optical networking firms. That's why Nortel is having a fit with the raiding of their researchers by a subsidiary of CSCO. JDSU will not go away and any drop should encourage additional buy in from everyone out there looking to get a piece of "the Intel of the Telecosm"* (borrowed from G. Gilder)
If Cerent is worth $9 billion, as a "start-up", then is JDSU truly overvalued? Same rationale as the guys the bid up Sycamore and other infrastructure IPOs to the stratosphere. Relatively, JDSU is cheap. Was much cheaper a year ago when I was looking at JDU at $15 canadian and didn't pull the trigger, for multiple stupid reasons. At some point in time in this very bullish market, you have to forget valuation issues and just buy and hold the companies that will be here for the next decade and beyond. That's a part of the basis behind the gorilla game, be the biggest and exert your influence to increase market share. Although JDSU is a king in the eyes of Gorilla Gamers, the opportunity for JDSU to become a gorilla is possible. If they can continue to leverage their stock and products to add parts of the puzzle (components for a true optical network) they can get themselves a lock in the industry. Why wouldn't Lucent, Nortel, Acatel, all the other telecommunication equipment providers use JDSU product if they can provide the modular systems at a cheaper cost and with fewer integration problems.
Sorry for the long rant, but the excitement in the stock is truly justified.
Later |
