Cfoe and James, appreciated your responses.
Cfoe, the assumptions you use for sales growth and net margins, while currently valid, strike me as long-term unrealistic if applied industry-wide (which you didn't).
But suspect I'd get similar responses posing the same question throughout the optisphere of SI threads. Unfortunately, the same happy ending won't come true for every stock.
The basic reason is simple. Ultimate monetary demand for bandwidth can not keep increasing at these rates. There's literally not enough end-user bucks around to pay for it if you extrapolate the industry's current growth out a few years. (You get an absurd percentage of GDP going to bandwidth, specifically optics. And that's GDP at its recent growth rates, which already reflect tech-driven productivity gains.)
And James, while going forward there may be relative hotspots amongst carrier class, metro, enterprise, and to the doorstep segments, oftimes it is easier said than done for a vendor to segue from long-haul to the metro ring. (Turns out there are other folks already there that don't take kindly to strangers!)
The secondary reason is industry dynamics and stock prices. The same thing will happen in optics as in earlier industries, with similar stock price bubbles. Everybody and his brother jumps into the industry (we already know there's tons of start-ups on the IPO deck for the next 12 months), the already big guys expand capacity to meet demand, product pricing gets more normalized, investor dollars get spread out further, etc. etc.
Out of that, a few long-term winners will emerge. For every long-term winner, there will be many, many losers. And, after a point, the big winners themselves run into what we've seen the last 12-18 months with the INTC's, MSFT's, DELL's, etc. of a prior bubble, or even the YHOO's and AOL's of the penultimate bubble. Of course, those winners did enjoy many years of above-average returns (well, in the case of the internet winners, about three years), and the optic winners have similar years ahead.
So I expect to see the "creative destruction" phase of the optics industry to begin in the next 12-24 months, and in two years (or sooner) we'll start seeing the optic equivalents of the Commodore's, Atari's, Informix's, Compuserves, bomb.coms, etc. of prior eras begin to litter the landscape.
As a largely industry-standards based business, it's hard to see how more than a small handful of today's players will achieve long-term competitive advantage once current product supply/demand imbalances correct (they will).
Methinks that there's buckets of money to be made at some point in the next year on the short side, not necessarily CIEN. The key to me will be when we get more and more IPO's of less and less substantive optics companies. It's coming. (If not, the whole market will have already cratered.)
Also expect that in about three months when guidance on 2001 is delivered by a bunch of folks, a few of this year's 87% guys will no longer be near that rate.
I enjoy lurking and learning about CIEN over here, and while the jduffy's are generally on the right track, they might not have the right target, nor timing. |
