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Technology Stocks : JDS Uniphase (JDSU)
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To: KMcKlendin who wrote (20633)6/22/2001 8:38:26 PM
From: Cary Salsberg  Read Replies (2) of 24042
 
RE: "Your concern that 10 years from now, JDSU may have half its peak sales is incompatible with my view of a strong long term growth trend."

First, I believe we all agree that the JDSU peak sales came in the midst of an internet driven tech bubble which distorted both stock prices and business levels.

This is the basic problem. We don't have a useful track record. When I said $450M/q for 10 years, I didn't necessarily mean perfectly flat sales. I was more concerned that the $18B over ten years, with improved technology to increase transfer speeds and/or the number of channel frequencies could meet the bandwidth demand. This could mean falling to $200M/q and then rising linearly to $700M/q over the 10 years, ~20% compound growth.

I think the investment community is clueless about the near term business prospects and about what the trough revenue levels will be. I think, after revenues fall in successive Qs from $900M to $600M to an initial forecast of $450, it would be prudent to wait until revenues stabilize. In the current environment, one must carefully balance greed and fear. $700M/q after 10 years only merits a price of $14 at a P/S of 6. This is only one scenario, but it puts things in perspective. To get much higher JDSU will need sales considerably higher than bubble levels. I can't rule out that possibility, but I haven't seen a persuasive argument for it.
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