MRV Communications (MRVC) opinions? Message Board

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Technology Stocks : MRV Communications (MRVC) opinions?

MRVC 9.975

-0.1%

Aug 15 5:00 PM EST

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To: Sector Investor who wrote (27708)	11/10/2000 12:05:12 AM
From: akmike	Read Replies (1) of 42804

Some quick thoughts on the pricing of LMNE: One could be disappointed that it didn't happen back when the market was so much more receptive; one could be happy that it happened at all in this environment; disregarding the aspect of the short-term valuations, the long-term would have been better served by raising more cash for the equity given up; being priced at 21 times trailing revenues is not expensive equity; most important, it probably more than adequately meets the needs of LMNE in terms of cash requirement. On the subject of MRVC valuation: the most commonly applied metric applied today in the optical sector is rev./price. For the most recently reported quarter LMNE's revenues = 42.32% of MRVC's total. The marketplace has valued that earnings stream at 12/sh. of LMNE or 23.04 for the 1.92 shares of LMNE/MRVC share. This would make MRVC's remaining revenue-producing assets valued at 31.36/sh. for a total MRVC valuation of 54.40. (For history buffs, maybe we should start a greedy little pig war and adopt "54.40 or fight" as our slogan) I would emphasize here that this is a "business valuation" as opposed to a market valuation. It is conservative because the LMNE revenues are currently producing a gross margin in the low 30's while the rest of LMNE is producing a margin in the high 50's; it is further conservative when one considers that much of MRVC is not even producing revenues yet, or in the case of Zaffire, not producing revenues that are being booked by MRVC. It is even further conservative when one realizes that the margins of LMNE will grow, the revenue growth rate will accelerate, and that once the current trauma of telecom debt/capital spending is concluded and marketplace psychology is normalized, that these earnings streams will receive a better cap rate. For those who have the capacity to hang on to the shares until LMNE is distributed the pricing tomorrow will be inconsequential. It wasn't very long ago that fiber-optic equities were universally overvalued. Unless some technology comes along to replace fiber optics in the near future we should at least see significant recovery of valuations as it becomes more clear how much faster this segment of the economy will grow than most other segments. When an industry is growing revenues at more than 70% annually the price doesn't have to remain static long to create value. LMNE could easily grow at more than 100% for a few years. It is hard to accept when we think about what "might have been" or "if only" but our company is making excellent fundamental progress on many fronts and I am happy to hang on tight.

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