Mitel mania hits market with a bang
Fans of 'anything optic': Stock surges 22% on news of fibre-optic development
Thomas Hirschmann
Financial Post, with files from Dow Jones
All it took was an announcement of a possible advance in fibre-optic technology to send Mitel Corp. shares on their biggest one-day run in more than seven
years.
The stock (MLT/TSE) surged $5.60, or 22%, to $30.70 yesterday, putting an end to a month-long slump. The move followed the company saying it has developed
smaller and cheaper technology to pump more information down the information pipeline.
Analysts, however, were reluctant to get caught up in the frenzy. One attributed the rise to the market's enthusiasm for "anything optic." Another said: "I've only
seen the press release, and I want to do my homework first, but they could have something."
Mitel said that it has produced working prototypes of a photonic product, to be called LightRider, that it says will create more bang for the buck in the dense
wave division multiplexing arena. DWDM is essentially technology that allows multiple wavelengths of light to be mixed and carried over a single fibre line.
According to the Kanata, Ont.-based company, current technologies allow for 16 channels, each with a wavelength of light. Mitel's prototype, using an Echelle
grating, offers 40 channels. That, in itself, isn't remarkable as a comparable product -- Arrayed Wave Grating -- carries 40 channels.
According to the analyst, the closest comparable technology is being developed by SDL Inc., a firm recently swallowed by fibre-optics giant JDS Uniphase Corp.
The key to Mitel's announcement is its claim that the product is cheaper and smaller than rival products because it uses common silicon chips rather than
expensive and bulky specialty processes.
Mitel believes its chip is about five times smaller than competing products. It said it is developing an 80-channel version of the multiplexing device.
Amir Karim, an analyst at Goldman Sachs, said the optics play is not a surprise, but rather the fact that the company "put it in writing" that generated yesterday's
enthusiasm. He estimated the technology could translate into additional revenue of $100-million to $200-million for Mitel in the next few years.
Analysts have high expectations for the company, even without the possibility of further revenues from this optics product.
Benoit Chotard, an analyst at National Bank Financial, rates the stock a "buy" with a $48-a-share price target. Chris Bonnet, an analyst at GroomeCapital.com,
also rates it a "buy" with a more bullish $58 target -- representing almost 100% upside from yesterday's close.
thirschmann@nationalpost.com |
