From Yahoo Message Board, FWIW:
<<Let me qualify my following comments by pointing out I don't understand much about technology or how ADCT's fiber optic products compare or compete with JDSU's. However, significant information was provided at the 2-22-00 annual meeting on ADCT's future in this area.
In reviewing fiscal 1999 results for ADCT's three primary divisions, Bill Cadogan pointed out that the Broadband Connectivity (BC) division increased sales 40% to $913mn and that, within BC, fiber optic component sales doubled in 1999. In subsequent Q&A, I asked if ADCT was disclosing the actual amount of 1999 fiber optic sales and what their outlook was for this area. Mr. Cadogan asked Lynn Davis (head of BC) to respond. Mr. Davis said ADCT has just started to get more specific about releasing information on fiber optic sales results, and fiber optic sales doubled to $50mn in 1999. Further, Mr. Davis projects fiber optic sales to continue to double annually over "...the foreseeable future."
ADCT's current market capitalization of $14bn amounts to 7 times revenues of $2bn. Looking at just fiber optics, ADCT's $50mn of sales in 1999 compares to $283mn for JDSU. JDSU's market capitalization is currently $75bn, or 265 times JDSU's 1999 revenues. While this may be somewhat apples-to-oranges, 265 times ADCT's 1999 fiber optic sales of $50mn amounts to $13.2bn, or over $44/share of ADCT.
What would have to happen to make the above seemingly exhorbitant revenue multiple actually make sense? Starting from 1999's base of $50mn and assuming a doubling annually (as Mr. Davis projected), fiber optic component sales alone will match ADCT's current total sales of $2bn by Q1 2006. Thus, IF fiber optic component sales continue to double annually over the next six years, JDSU's valuation looks reasonable and ADCT is currently undervalued by over $40/share on this area alone.
If I have time, I'll post some additional comments on the annual meeting later, including a bit more on ADCT's fiber optics growth strategy.>> |
