John, Mike & Tom's <b>Wild World of Stocks</b> Message Board

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Technology Stocks : John, Mike & Tom's Wild World of Stocks

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To: John Pitera who wrote (2292)	4/24/2001 9:49:42 PM
From: Logain Ablar	Read Replies (1) of 2850

Hi John: I saw your comment to Poet and I'll try to answer what I like and dislike about CORV on this thread. Note some of my dislikes apply to LU in spades. LU should get pumped by the investment houses like Goldman and Morgan that are looking @ the investment banking side but fundamentaly they still have hurdles (doesn't mean it can't make it to $16 area though). CORV: 1) Good balance sheet (as of last Q) with basically no debt and net around $3.5 / share in cash/securities. Note until they become profitable they can burn thru the cash. Need to see this quarter results and the cash burn. I actually didn't print of the bs or listen to a cc which I will do this round. The stock didn't catch my eye till it broke $6 area. 2) From my readings (No expert so take this for what its worth,) they have the leading optical switch. Great but in this environment ASP's are dropping like a stone so even with a value added cost beneficial product they have to cut prices (lower ASPs are going to hit LU). 3) Just indicated they are going to compete with CIEN by year end with a new switch. Great but thats 6 to 9 months away which means higher costs now before the product starts to sell (leasing a new 80,000 sq ft facility). I hate to see companies expanding in a slowdown. It means they will be putting pressure on the balance sheet and unless they start generating income the stock will be under pressure. 4) Gilder liked it and last month added it to his telescom list. This is a double edged sword. As an example he's liked gstrf as well. I used to subscribe to the gilder letter but found the education quality starting to fall off and he did seem to be front running stocks like avnx. 5) Telecom is an unloved sector (remember my post with the ex lehmans report) and even a good company has the 80% of market and sector risk to overcome. Thre is a huge amount of debt to be worked off in this sector. A lot of companies are going to make due with what they have versus spending for new tech even if the tech can make them more efficient. Why spend for cutting edge when you can probably buy it for pennies on the $$ in bankruptcy. 6) CORV should actually be acquired by CIEN or JNPR. CORV fans won't agree but one of the problems of the mania is companies like corv were able to raise major bucks from investors. Now they will duplicate efforts being made at other companies and duplicate costs (R&D, back office, sales & marketing) until they start to burn the cash. If they can't raise more in the equity markets they will be acquired for much less than they can command today. Not sure of the enterprise value @ this point and I don't think they should sell out at this level but they should be positioning themselves to maximize shareholder value. I'm not saying they can't survive just they can combine with one of the leaders and be part of a powerhouse. CORV is not alone. CMRC also falls into this category. I still remember when INTU was to be acquired by MSFT for $80 ($130 todays prices). INTU the company has done very well but the shareholders would have been much better off with msft shares (after the justice or ftc nixed it msft kept going and intu went into the teens although its split since then). So I like it under $8 but don't know if I like it over $8 until we see earnings. From what I've read the CEO doesn't want to sell out (I can't blame him from the sense its his company and his baby). Just from a shareholder perspective (I have some shares) being part of one of the larger companies can have some benefits. Did I ramble enough? Just remember I have not checked with Broadwing, Williams or Quest purchasing areas to see how well they like the product and if they are willing to buy more and @ what price (something good analyst should do). Tim

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