Hi Ken & all - having a hectic week, I have finally managed to think more deeply on this latest Qtera acquisition. It occurs to me that this is probably one of the best buys - probably second to the BAY deal. Ok, everything is relative, especially when this is a stock swap deal, but here is how I see it. At present, there are only three cos with this kind of products [actually, my impression is the CIEN's is not ready yet.] If there is any truth to the rumour of Cisco and Corvis possible combo, definitely, Qtera is a good price. So, is there any truth to the Cisco/Corvis deal? Well, both cos decline comments, but it is obvious that someone[s] are floating a trial balloon. However, $10B number may not be far fetched. At present, CIEN market cap is close to $10B. To take over CIEN probably requires a lot more. One may argue CIEN is an *accomplished* co with substantive revenue stream. It also has an installed base to boot. OTOH, DWDM competency is not as rare as CIEN first burst onto the scene. The low end doesn't provide the margin. Also, cos like NT, CSCO and LU probably do not clamor for customer acquisition as much as their smaller competitors. Although I do have hard data, I would think CIEN's customers are also customers of the big three. I should be careful though. CIEN is a fine company. My point is that knowing the history of Corvis, if human ego plays a part of it, I think Corvis would demand a high price relative to CIEN.
Next, one analyst [from Sutro & Co] thinks NT should simply develop the product in house. Knowing the depth of talents of NT or LU, I do not doubt it is impossible. However, timing is everything. Qtera is into trials now, so it is a matter of being the First Mover. If Mr Roth's analysis is correct, if Qtera acquisition is accretive for 2001 [and neutral on earning for FY 2000] it is a cheap investment w/o spreading the engineering departments too thin.
Therefore, unless there is any change in infrastructure demands, Qtera is likely a good buy.
best, B |
