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Technology Stocks : Finisar - FNSR
FNSR 23.770.0%Sep 24 5:00 PM EST
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To: pass pass who wrote (193)12/29/2000 11:36:55 AM
From: Jay King  Read Replies (1) of 509
 
>>Is there a reason why FNSR has a $4.5B market cap and its closest competitor STLW only has a $900M market cap?

Collectively, the market thinks FNSR will generate 5 times the forward-looking earnings of STLW.

If the market thinks FNSR has even the slightest competitive advantage, it can cause a wide separation in market caps because market cap is the total area under the forward looking earnings curve. The further out in time the advantage is expected to last, the wider the market cap separation will be.

A most interesting example of this effect is in the Voice over Packet market, with the two leading independent suppliers of VoP systems:

Sonus Networks (SONS) $4.9 Billion
Clarent Corp. (CLRN) $0.48 Billion

With 10 times the market cap, it is currently perceived that Sonus Networks has a large competitive advantage over Clarent, in this very young emerging market. Personally, I think it is too early to make this call, but the market is traditionally good at picking winners early.

For example compare BRCD to competitors in the Fibre Channel Switch market:

BRCD $20.291B
MCDT $6.596B
INRG $1.442B
VIXL $32.8M
ZOOX $59.5M

Check back in 12 months, and these companies will likely be ranked in the same order.

-Jay
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