That article is about more than just the death of SONET. Think what it says about the big telecommunications companies two years from now.
I strongly urge everyone who is holding MRVC stock to read this article carefully and think about it. It would be WONDERFUL if we could then have a thread discussion about it.
Here is the link again. forbes.com
The elegance of Mr. Gilder's article speaks for itself better than anything I could add. But, I would like to highlight a few snipets of his article for emphasis.
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"Last year was the biggest sales year ever for SONET, the synchronous optical network hardware used for routing voice and data packets over the telco's extensive fiber-optic networks. A.D. 2000 likely will be even better, and the market may grow to $10 billion ... right before it collapses. Like the final supernova of a brilliant star, SONET will blow up to thousands of times its original brightness--just before it caves in on itself to a dark, silent death. And like the resulting black hole, SONET can suck companies as large as Cisco Systems and Nortel Networks, Lucent and AT&T, and as fashionable as AMCC and PMC-Sierra, into its downward spiral, unless they commit fully to the new world--the all-optical network."
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"Better photonics equipment can switch light directly and send signals much farther without repeaters. WDM can vastly multiply the number of signals carried over existing fibers. Put together, these advances will eliminate electronics along the fiber network altogether. Only a modicum of good ol' silicon circuits will be needed at the endpoints."
"When that happens, SONET will collapse. Suppliers like Cisco, Nortel (which commands 41% of the SONET market), and Lucent (which, after acquiring Ascend, has an estimated 33% of the more modern SONET market) will have NO buyers for this gear."
[Note: Now remember the LU-MRVC discussion on the Yahoo! thread a week or two ago. Which would YOU rather hold?]**
"Customers will no longer have to wait half a year to buy or lease a new T1 or T3 line.By 2001 it will be common to buy fractional wavelengths, in real time, for contracts measured in hours or even minutes."
[NOTE: So both SONET AND the T1/T3 markets will collapse. And data volume growth dwarfs phone volume growth. What then happens to AT&T and other big telcos?]
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"This trend, as Cisco CEO and President John Chambers has noticed, pushes the action toward optical networks. He has moved with astonishing speed and determination to reposition Cisco, through its acquisition of Monterey and its staggeringly priced $6.9 billion purchase of two-year-old startup Cerent. However, the Cerent 454 (now known as Cisco ONS 15454), the company's sole product, is a SONET box. Admittedly it is the most stupendously efficient, versatile, diminutive, and altogether wonderful SONET box ever, at half the price of last year's boxes. Bit rates can also be swiftly and cheaply upgraded. And it incorporates post-SONET capabilities. Not surprisingly, the 454 was highly successful at attracting customers; more than 100 signed up in less than nine months, for a projected annualized run rate of $100 million before its first birthday. Among the eager buyers were Williams Communications, Frontier Technologies, Qwest Communications, and Nextlink. But the party will be short-lived. Almost anyone could sell SONET technology in 1999. That won't be true in 2001. The money flowing into SONET out of telco profits has made carriers desperate to kill it off."
Wow! Think about CSCO paying $6.9 billion for a company with $100 million in revenue and a TWO YEAR projected life. What does this say about the "vision" CSCO management has?
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