From our friends on the SDLI board...
To: pat mudge who wrote (1001)
From: hospitalman
Sunday, Mar 19, 2000 8:13 PM ET
Reply # of 1004
Pat
Just finished reading a report by MSDW on Optical Netowrking dated 2/14/00. Seems like you've read everything but incase this escaped you, here are a few highlights.
First, other than a few references SDLI is noticeably absent. their top 5 picks are scmr, lu, jdsu, cien, and etek. they mention that sdli is focusing on product development in the high end submarine
market. They state that sdli is aiming for >50% share of 980 pumps in 2000. they mention that sdli currently sells pump laser chips to jdsu but jdsu is beginning to use their own. they emphasize the
need
for all companies to sell packaged modules as opposed to separate components and in a chart comparing how each company does in this regard they give jdsu the highest score at 9 and sdli a 5.
For the market in general they predict optical network systems to grow from 3.1 billion 1999 to 17 billion 2003, (excluding SONET). SONET to grow from 7.7 billion 1999 to 17.2 billion 2003.
Components to grow from 5 billion 1999 to 23 billion 2003.
Though they single out 5 companies for special emphasis it's interesting to note that they end their commentary by saying: "Who will win in optical components? For the next few years--everyone, we
believe. the optical components industry is supply constrained. That means that any component produc er able to keep up with the rapid pace of new technology development should be a winner for the
next couple of years."
Ken
And Pat's response...
To: hospitalman who wrote (1002)
From: pat mudge
Sunday, Mar 19, 2000 11:17 PM ET
Reply # of 1004
I read the MSDW report and had some of the same responses. I certainly don't worry about Merrill's not having the full story as they're often behind the 8-ball. Their five picks --- scmr, lu, jdsu, cien, and
etek ---- are from the broader industry, indicating they picked one from each sub-category, JDSU no doubt for actives and ETEK for passives.
Incidentally, SDL's share of the 980nm submarine market is closer to 70-80%, with obscenely high margins. [From CC: "GMs for year 43% up 8.7 pts. y/y. Due to larger mix of undersea chips."]
Not sure how they rate the modules. JDSU would have more volume, but SDL is certainly a leader in certain areas, including RAMAN modules --- planting their stake in the 10Gbp/s and 40Gbp/s space. I
believe JDSU's announced they hope to have RAMAN available by mid-year. When SDL was qualifying their third major customer, I asked where the customer would go if SDL didn't pass and the CFO
said, "Nowhere --- no on else has it." The company has subsequently qualified with that customer. [From CC: "RAMAN pump laser named "Best Product in 1999. . . shipped to 10 customers for
terrestrial and undersea testing. Will double production in Q1. RAMAN is leading contender in next generation 40-gig systems. . . . 329% increase in international revenues, to over 50% of sales. Pump
laser contract with second undersea customer is ramping, now have production orders from third customer. First shipments in Q2 for third customer. As production capacity ramps, we could get up to
70 or 80% of this market (980nm DWDM laser pumps for undersea). Increased interest from long haul and metro markets. Shipments to Metro and cable grew over 40% sequentially. Broadening
customer base to new markets and building key customer relationships."]
I agree with Merrill's conclusion. There won't be one leader. As long as the demand is as strong as it is, all the key players will do well.
Pat |
