From WitSoundview this morning:
Photonics Update
K Slocum
In our June 22 update, we forecast that the June quarter reports for the optical communications sector and the predictions about the future would put the bottom in the group and set the stage for a recovery that would produce 50% to 100% returns over the ensuing 12 to 18 months. Living through the period was painful, but we believe that our call has been strengthened by what has transpired since that time. Over $5 billion of inventory has been revalued or written off. Inventory balances among the major equipment suppliers in North America and their contract manufacturers have fallen more than 20% from their December quarter peak. Capacity and employment levels have been slashed throughout the industry. Carriers on average hit second quarter numbers and while they cut capital spending budgets further, the cuts have moderated, and Street revenue estimates for equipment suppliers over the balance of the year roughly match these reduced expectations. The most important development that we would observe is that large bandwidth buyers have begun cutting capacity deals and in some cases multi-year buys. By themselves they may not represent the turn, but we believe they set it in motion. Only Cisco and Corning have managed up stock performances since our call; however, we believe the coming months will change that. We are reiterating strong buy ratings on Ciena, Digital Lightwave, Finisar, JDS Uniphase, ONI Systems and Tellium. We also reiterate our buy ratings on Corning, Nortel and Optical Communications Products.
Ibexx |
