Dell'Oro's numbers include SONET/voice spending. You have to look at DWDM growth to understand where SDLI and JDSU are positioned.
This evening I received a copy of the Wall Street Transcript interview with Don Scifres. I'll transcribe a few segments.
INVESTMENT HIGHLIGHTS
* 208 percent revenue growth year over year (Q3 1999 to Q3 2000)
* Fiber communication revenues up 332 percent in Q3 2000 vs. Q3 1999
* Broadening revenue opportunities with higher performance module-level products
* Strong margin expansion due to improving mix, yields and utilization
* Industry leading customer base (Alcatel, Corning, JDS Uniphase, Lucent, Nortel and others)
* Terrestrial and undersea market share growing with long-term contracts
* $5 billion DWDM component market growing 40-50% CAGR
RECENT SDL HIGHLIGHTS
* Acquisitions of PIRI, Veritech and Queensgate; significantly broadened product line and revenue opportunities
* 33 percent sequential revenue growth in Q3 2000; 38 percent in fiber optic products
* Gross margin up 4.0 points sequentially to 56.6 percent
* Operating margin up 5.0 points sequentially to 39.4 percent
* Record orders
* 5X capacity expansion program
INTERVIEW (snippets)
TWST: Do you see any big changes taking place in the industry other than the demand?
Dr. Scifres: There are two trrends under way to help meet the bandwidth demand. The first is for higher data rates. We're seeing a trend where deployed systems are going from two gigabit-per-second data rates to 10 gigabit-per-second data rates, and up to 60 gigabits per second in the future. The second trend is in wavelength division multiplexing (WDM). The trned there is to see more and more light wavelengths or channels multplexed onto a single fiber. . . .
TWST: As we look out over the next couple years, do you see any technological change that is going to essentially obsolesce what you're doing --- or are you leading-edge at this point?
Dr. Scifres: We tend to be the folks who obsolesce others. One of the new technologies that we just introduced is in the area of Raman amplification. Raman amplification allows one to increase or amplify the signal levels in the fiber so that the signal can travel farther at higher data rates through the fiber. We have the first high-power product on the market for this new amplifier technology, and we own several patents and other intellectual property associated with it. We expect this new Raman amplifier technology may be used to implement 40 gigabit-per-second data rates.
TWST: What is the size of the industry that you're participating in right now?
Dr. Scifres: Ryan Hankin Kent, an industry survey firm, has indicated that in 1000 the WDM market was in the range of $5 or $6 billion revenue. They're projecting it to be in the range of $20 to $25 billion over the next four to five years.
TWST: Will you expand through internal development, or are acquisitions going to play a role?
Dr. Scifres: We have done both in the past, and we believe that will be a continued pattern in the future. We have been very good at developing leading-edge products internally. But we've also been quite successful at acquisitions. We bought a company, SeaStar Optics, back in 1995 that has led the charge in certain of our pump product lines for optical amplification. They're up by almost a factor of 12 in revenue over that time period. In 1999, we bought a light-modulator company called IOC International in the UK, and they've grown by over 130% relative to a year ago. So far in 2000, we have completed three acquisitions: Queensgate in the UK for network monitoring product, Veritech in New Jersey for high-speed module design capability and receiver products, and PIRI in Ohio for multiplexing products and silica waveguide technology.
TWST: If we put all this together, what kind of growth should investors expect from the company over the next three or four years?
Dr. Scifres: Analysts for 2001 are projecting revenue growth in the range of 100%. Longer term, the Ryan Hankin Kent survey, for example, projected the component part of this market to be growing at the rate of 40%-50%, compounded annually over the next five years. As such, we believe we're in a great market.
TWST: What could limit your growth? Do you have the structure you need? Do you have the balance sheet you need in place?
Dr. Scifres: Yes, we do. We have developed a bigger, better and stronger infrastructure in the company over the past 12 months. The balance sheet is fine. We had a positive cash flow from operations of $112 million in the first nine months of 2000 despite our 157% overall revenue growth. Last year we raised $260 million of additional cash to expand our operations as well as potentially fund acquisitions, so I think we're in good shape there.
Right now our growth is really limited by our ability to expand our production levels. But we have put in two new production facilities within the past six months, doubling our square footage in two different locations, and we have facility expansions in excess of 200,000 square feet currently in process. So I think we're positioning ourselves to meet that expanding demand. . . .
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