DEAD as A DOOR NAIL....
Post from RB on CABOT letter:
ragingbull.lycos.com
Smells like a P&D to me..
From the letter:
During 2000, the company sold products to 180 customers, including 3M, Alcatel, Avanex, Harmonic, JDS Uniphase, Motorola, Redback Networks, Scientific-Atlanta and Tyco Electronics...
ALA:
Alcatel claims to be the world leader in total terrestrial and submarine DWDM systems, in digital cross-connects, which contain the enabling technology for operators to offer high bandwidth services, and in SDH networks...ALA was just downgraded because of slowdown:
cnet.com.
MOT downgrades:
cnet.com.
Avanex AVNX cut:
cnet.com.
Harmonic...HLIT Cut layoffs and reduced orders...AFOP CC was before this news:
Feb 06,2001
Harmonic to Cut Work Force
By 10% Amid Weak Revenue
Harmonic Inc. expects to reduce its work force by about 100, or 10%, and to record a related one-time charge of about $800,000 for the fiscal first quarter ending March 31...In November, Harmonic confirmed that AT&T Corp.'s AT&T Broadband unit wouldn't accept deliveries from Harmonic for the balance of the fourth quarter, reducing Harmonic's revenue for the period by $2 million to $3 million. In December, the company warned that its fourth-quarter loss would be wider than expected due to due to "challenging market conditions" and customers' delayed orders...
public.wsj.com
JDS Uniphase Nortel Corning JDSU, NT, GLW:
Friday February 23 5:03 PM ET...
And last week, telecommunications equipment maker Nortel Networks Corp NT, the world's biggest supplier of fiber-optic telecom gear, said it will post a first-quarter loss and lowered its revenue growth expectations for the year.
Other high-tech powerhouses like Cisco, JDS Uniphase Corp. JDSU and Corning Inc. GLW have recently ratcheted down expectations with slowdown warnings. And they won't be the last, said Walter Casey, co-manager of Bank One Investment Advisors' technology fund.
``The entire (telecom) area for awhile may be under a cloud,'' he said. ``There are serious finance issues, serious issues of profitability in customer base and in the supplier base and I don't think that's a short term issue.''
GLW:
cnet.com.
JDSU:
cnet.com.
CSCO:
cnet.com.
From the letter:
Alliance has recently begun selling its wavelength management products. With the cost of actually laying more fiber somewhat high, telecom firms are turning to dense wavelength division multiplexing (DWDM), which splits a light beam into numerous wavelengths. It’s an easier and cheaper way to multiply their capacity! So you can imagine that demand for these components is huge!
In this category, Alliance offers products like fused fiber WDM couplers, filter WDMs and DWDMs, all of which basically combine and split optical signals of different wavelengths on a single fiber.
MY TAKE:
With JDSU and CSCO and NT giving foggy forcasts for the 2nd half of 2001 IMO AFOP is NOT cheap...A just put out a lousy picture today and CIEN was rosy but that is suspect since they are doing a stock offering...AFOP has some exposure to CIEN because they expect to sell them $1M worth of product in 2001...The last Q there was supposed to be a pushout of new products to CIEN that did not meet what the estimates were expected...I do not know why the revenue was not what was expected from them but the % gain for AFOP is ridiculous for their exposure to CIEN...The contract is not news and it is not that large...The CIEN account was already factored into the 1stQ 2001 numbers which represent only a 5% increase in sequencial revenue, this is including the CIEN order that was remaining from the 4thQ 2000...
Inventory returns were 3.3M for the last Q...
OPIS side was weaker than DWDM in 4th Q 2000 so the growth is expected DWDM...Look at the action in the DWDM field in the last week and you can see the downside...CIEN is the new customer that is expected to fuel growth but that stock is down huge after earnings due to the NT outlook...Back in February 2 when the CC happened AFOP was expected to get 5% sequencial growth from the $8.8M in 4th Q 2000...The OPIS products were not to be growth but rather DWDM, given the recent news there is some question if that is possible...DWDM revenue accounted for only 15% for 2000 and was expected to grow to 30% for 2001, Customers are JDSU, CIEN, ALA...etc.
Given the rich valuation and the revenue expextation of only $47M for all of 2001 and earnings of only $2.6M and eps $0.07 this stock is trading at a very rich valuation given the market conditions...OPIS revenue was already flat for the 4th Q so the focus and growth is DWDM...
Look at NT, JDSU, ADCT, OPLK, NUFO, and EXFO...They are all down huge...AFOP can't remain this strong long IMO...
Finally, OPLK is more AFOP's speed to begin with...Oplink Communication, Inc. (Oplink) provides a broad line of high performance fiber optic components and integrated optical modules worldwide to communications equipment suppliers. Oplink's bandwidth creation products substantially increase the capacity of fiber optic networks. The Company's bandwidth management products provide communications service providers with network intelligence, or the ability to monitor and manage optical signals to enhance network performance....Barrons did a spot piece with with George Paoletti and his take on OPLK this weekend:
interactive.wsj.com
NUFO $29 raised estimates for 2001 from $150 million to $240 million margins are expected to be in the 43-48% range...
AFOP $11 has estimates of $46M with margins in around 28%...
I am not alone:
2/23/01 Spotlight: Alliance Fiber Optic (3:12)
Audio Exclusive from Briefing.com
on24.com
Smelly smelly P&D to watch IMO...
A little more information...
lightreading.com
"In a report dated February 22, Epoch Partners analyst Seth Spalding discusses the latest earnings warning from Lucent Technologies Inc. (NYSE: LU - message board) and comments on disappointing results from its Agere Systems subsidiary for the quarter ended December 2000. Through an addendum to its S-1 filing, Lucent warned of poor fiscal Q2 (ended March) results. Concurrently, Agere’s S-1/A filing included a disappointing earnings report for the quarter ended December 2000. The author also notes that, in addition to reporting a weak quarter, Agere essentially pre-announced its March quarter.
In Spalding’s view, Agere's pre-announcement should have come as no surprise in light of the malaise within the communications equipment sector over the last two months. Comments from Cisco Systems Inc. (Nasdaq: CSCO - message board), Nortel Networks Corp. (NYSE/Toronto: NT - message board), and others outlining the abrupt change in U.S. service provider capital spending, highlight the magnitude of current industry weakness, according to the author."
More on the LUser situation too...
cnet.com.
New York, Feb. 23 (Bloomberg) -- Lucent Technologies Inc. persuaded banks to provide $4.5 billion in new loans, enabling the biggest maker of telephone equipment to avoid a possible debt- rating cut to junk status.
The 364-day credit line, arranged by J.P. Morgan Chase & Co. and Salomon Smith Barney Inc., came after personal appeals to lenders by Chief Executive Henry Schacht and last-minute talks led by Chief Financial Officer Deborah Hopkins.
The new loans replaced a $2 billion line that expired at midnight last night. The remaining $2.5 billion will be assumed by Lucent's microelectronics unit, Agere Systems Inc., after its planned initial public offering. Lucent also amended a $2 billion five-year line, giving the company a total $6.5 billion in available bank financing.
''We are now moving ahead totally focused on executing the turnaround of our business,'' said Hopkins in a statement.
With the new lines, Lucent skirts possible ratings cuts by Moody's Investors Service and Standard & Poor's, which both lowered the company's debt to one notch above junk status last week. A cut to below investment grade would mean higher borrowing costs for the biggest telephone-equipment maker.
Typically, companies arrange to replace credit lines months before they mature to reduce the risk of losing a source of funding, or a backup for other short-term debt programs. The deadline talks reflected bankers' reluctance to lend to Lucent, which posted an operating loss in its fiscal first quarter amid declining sales.
''It's amazing what Lucent has had to do,'' said Glenn Reynolds, an analyst with Creditsights.com, an independent research firm.
Down to Wire
Hopkins didn't attend the company's annual meeting in Orlando, Florida, this week to work on securing the credit lines in New York instead. Documentation for the loan didn't get completed until 11.00 p.m. last night, just one hour before the deadline, according to a banker that worked on the financing.
About 30 banks pledged commitments, according to the banker, including Deutsche Bank AG, Bank of America Corp., Bank One Corp. and Barclays Capital. Morgan Stanley Dean Witter & Co., the lead underwriter on Agere's IPO, also agreed to lend, as did Bear Stearns & Co., which is likely to have a co-underwriting slot on the IPO, the banker said.
Credit Suisse First Boston resisted after Lucent turned down its proposal to arrange the financing, according to another banker familiar with the matter. Goldman, Sachs & Co., which advised Lucent on its $21 billion acquisition of Ascend Communications Inc. in 1999, also balked.
All the banks declined to comment.
Pledging Assets
As an incentive, Lucent agreed to pledge its assets as security on the new $4.5 billion lines, and on the existing $2 billion five-year line that was amended. Hopkins said on a conference call a week ago that Lucent would also reward its lenders with future business, including roles on Agere's IPO.
Lucent needs the loans to help fund day-to-day operations after a series of debt-rating cuts effectively shut the company out of the commercial paper, or short-term debt, market.
The company last month said it will shed 16,000 jobs --10,000 within six weeks -- as part of a plan to cut costs and return to profitability. Securing the loans was also part of the turnaround plan, Schacht said.
''Lucent hit a big bump in the road,'' Schacht told bankers on the call last week. The credit lines would help put Lucent ''back into a profitable position.''
Lucent's shares fell 13 cents to $12.40.
My TAKE:
I have another rather simple question???
If Agere is already spoken for what is the value and if the growth in the sector is slowing??? Sounds like some bets are being laid at the tables and the markers are maxed out...Is it 21 or bust??? I figure that at least in the short term that revenues will be boosted at the expense of margins to keep the IPO strong...JMO...with price gouging the competition will be hard hit IMO...
CABOT changed the rating to hold today MER yesterday...AVNX is death kneel for AFOP IMO...
AVNX warned tonight that tere was weakness in the "mature" optical components area...AFOP sells to AVNX...85% of the revenue from last Q was from that(OPIS)area...The company had hoped to increase DWDM sales but thus far that has not been shown...AFOP is set to sink like the Titanic IMO...2001 sales were expected to be in that area at a 35% growth rate and account for 70% of revenue...IMO you are looking at a pipe dream... |
