Oclaro, Inc. (Avanex-Bookham) Message Board

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Technology Stocks : Oclaro, Inc. (Avanex-Bookham)

OCLR 8.260

0.0%

Dec 10 4:00 PM EST

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To: chuck weir who wrote (1505)	1/25/2001 12:40:55 AM
From: Kerry Lee	Read Replies (1) of 2293

Tough call. Outside looking in and without the benefit of knowing the whole Avanex "story", there are enough risk factors to make one step back and ponder before taking any new positions in AVNX. For instance: 1) the company has a "hot/proprietary" technology BUT can it be productized on a national/worldwide scale? I kept hearing words like "pilot plant", starting the "ramp", looking to "outsource" to "improve margins". Usually companies do not sustain abnormally high market valuations when their gross margins are below 55-60%. Normally a "hot" technology is associated with very high gross margins. 2) the company appears to be in "transition" from the lab to the "real world". Will it work?? I would be concerned that the founder has handed over the reins to a new president/ coo , who by the way took Greg Reyes' place on AVNX board of directors. I looked at Greg Reyes involvement on the BOD as a plus for AVNX as he has proven himself to be a hugely successful executive in turning around Brocade and creating humongous shareholder value for BRCD shareholders. Now that Greg Reyes is no longer on the AVNX BOD, I myself have less confidence in their near term outlook. 3) The near term outlook for fiber optics/telco capital spending is ????? 4) $4.3 billion market cap on a $200 million annual run rate on revenues with 47% gross margins ( LOW margins ) Long term could be a huge winner BUT given the above, is it possible to buy AVNX a little cheaper, ie 45-55 range? My best guess is that AVNX returns to a trading range of 45 - 75 ( extreme volatility due to low float ) until AVNX provides a more bullish outlook/numbers. Good Luck,KL

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