cbs.marketwatch.com
P Com and Ortel mentioned as cheap acquisition candidates in the Market Watch article.Here's the relevent excerpt:
<<<The second major growth area is wireless, which is
not materially participated in by Cisco. Cisco has a
partial investment in a wireless company with
Motorola (MOT: news, msgs), and they recently
bought Aironet for wireless local area networks,
but that hasn?t been a real big business for them.
It?s a very sizable business for Nortel, probably a
good 15 percent to 20 percent of revenue. And it?s pretty close to that for
Lucent as well.
If you are looking for major themes to invest, I think optics is one.
Wireless is another. The third theme is the transition from circuit-switched
networks to packet-switched networks. This is probably Cisco?s biggest
opportunity right now. Cisco doesn?t have any revenue in circuit switches.
Nortel and Lucent probably each have 20 percent of their revenue in
narrowband voice switches.
I would certainly expect Lucent and Nortel to get their fair share of this
next-generation packet-switched market. However, Lucent and Nortel
have a big chunk of revenue at risk in the circuit-switched. While you?re
still going to see growth for these companies, you?re going to see that
tempered by slower growth in the circuit-switched business. Cisco
doesn?t have any circuit-switched business to cannibalize. So it?s going to
be a pure growth opportunity for them.
CBSMW: You?ve explained the dynamics in the market for
packet-switched gear. Can you expand on optics, the fastest
growing market.
Houghton: Optics. Instead of sending electrons down copper wire, you
put photons down glass. There are a number of layers. The most obvious
layer is the physical glass that gets put down along the ground, or along
railroad tracks, or highways. This is produced by Corning (GLW: news,
msgs) and Lucent, the two major producers of optical fiber. The next
layer is putting those photons over the optical fiber. Those are companies
like JDS Uniphase (JDSU: news, msgs), SDL Inc. (SDLI: news, msgs),
Ortel (ORTL: news, msgs). Then you have the companies that use the
components to put together the systems that put signals over those optical
fibers. The obvious ones are the Lucents, the Nortels, Tellabs (TLAB:
news, msgs). Then you have emerging players like Sycamore Networks
(SCMR: news, msgs).
What?s causing the trend in optics is the explosion of bandwidth. The thing
driving bandwidth has been business customers. Going forward it will be
consumers. Right now most users connect to the Internet via their phone
lines; 56K is the best you can get. As you go to cable modems and
high-speed DSL phone lines, now you are going to 6 megabits. As you go
from tens of thousands of subscribers using this kind of bandwidth to
millions of subscribers, that?s going to multiply the capacity required. That
means more fiber optics.
CBSMW: Which public companies do you think are the best or most
likely acquisition targets?
Houghton: I think Ortel trades at a significant discount to almost all the
other optics companies. They have very good technology. Another
company that could be an acquisition is P-Com (PCMS: news, msgs). It?s
had some tough times, but they do have some good point-to-multipoint
technology for the wireless-access market. The only other public
competitor is Netro Corp. (NTRO: news, msgs), and they are trading at a
significant discount to Netro.>>
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