Jack,
This response may meander a bit but I think I can support my statement of CIEN's value in today's market.
The concept of DWDM is really quite simple. Consider a flexible pipe (waveguide) that is mirrored on the inside with a guy holding a flashlight at one end going dit dah dit dah etc. The guy at the other end reads the code and translates it into an electric signal for further transmission down the line.
Next replace the flashlight with red, and green, and blue or any other color (wavelength)and simultaneously send a signal on each wavelength. This is multiplexing. The blinking light is the modulator and operates a little faster than morse code, say 1 billion to 1 trillion bits per second and the wavelength is in the micrometer range (invisible to human eye). This is true broadband - high speed data transfer, which is currently state-of-the-art in long-line telecom.
Now, eliminate the bottlenecks and replace the electronic guts on both ends with optical switching gear, and port the technology into a metro area.
If you see how all this ties together, then you must realize how CIEN fits this profile.
DWDM is such a simple concept that it has become a commodity product is just three short years. There is formidable competition here from the likes of LU, NT etc. However, the current and potential market is huge, and there is plenty of upside left for all players.
Now, superimpose the photonics market potential on top of CIEN's current slate of products, and you are off to the races with an awesome suite of products, and one stop shopping. Isn't this what made Cisco a household name?
The internet buildout is just beginning. You ain't seen nothing yet, brother. Now, you know why Nettles was so excited about his acquisitions of Lightera and Omnia.
Furthermore, I see the TLAB abortion as a golden gift to Ciena. They now have the technological and financial muscle to stand alone. A 13 billion dollar market cap can do wonders.
What is value? It's a relative term, and very hard to quantify. You had best forget about the concept ot PEG valuation. That's only good for the "Old America". "New America" valuation requires subjective vision. Look at AOL. The last figure I heard was that the company was valued at over $50,000 per subscriber. There is no way in Hell that AOL will ever generate sufficient cash flow to support a discounted present value equal to its current market cap. Yet, savvy money managers are flocking to the stock because of perceived value (or is it greater fool theory?)
CSCO, an extremely well managed company, paid $7MMM for Cerent, a company that had revenues of $70MM. My arithmetic says that's ONE HUNDRED times sales! Do you believe for a minute that Cerent's future cash flow would support a present value of $7MMM. Sycamore (former Cascade hands) is valued at astronomical levels. And so was Monterrey. These were start-up companies, albeit with proven management and proprietary technology. Look for Corvis (former Ciena founder) to come blasting out of the gate with a multi-billion dollar market cap on day one of their expected IPO. All things are relative, and beauty is subjective, but we all know it when we see it. Amanda Peeks, for example.
Lastly, if you've read the Soundview report you would have noted the BT connection. Who's BT? The other AT&T over there. The current value of the contract is immaterial. (It's like getting to first base with Amanda.) Don't lose any sleep over it. They will love Ciena and its products and come back for more. The first contract merely opens the door . . . and its a big room.
Hey, my expertise is in technical analysis.
Regards,
Jack Hutchison
Also, Soundview reports (or is it speculates?) a new (BIG) customer which is unannounced by Ciena at this time. Last month's rumor mill cited Qwest. Maybe, maybe not. Last I read Qwest awarded contracts to competitors of Ciena. Maybe there is more to come from this buyer. |
