Craig,
Like I said, Ciena has had a fine start, perhaps even a spectacular start. I don't take that away from them. I simply made a cold calculated decision many months ago to place my bet on Lucent, based largely on what I perceived to be an understated position that Lucent had in DWDM. Unlike Ciena, it was not issuing pompous press releases weekly about the tremendous benefits of DWDM, even though it had a pioneering role in the underlying technology. Ciena was sprinting for one single reason. It got to market first with a product that the world was hungry to buy. It's a great achievement. But it does not necessarily equate to sustainable competitive advantage. (Reminds me a bit of Compaq, another Ben Rosen-backed company. Compaq proved its meddle over time. It's much too early to say whether Ciena is made of the same stuff.
Your analogies to Cisco and IBM are not compelling. Remember that Cisco essentially invented networking. Then it had the skill to have a management which realized that it did not have a monopoly on good ideas. As for comparing LU to IBM in squandering a technological lead in computers and missing out on the microcomputer revolution because of fears of cannibalizing its mainframe computer line, I do not see Lucent asleep at the switch (pardon the pun).
I have no idea where Ciena will be in 5 years time. It's a probabilistic type of thing. It might, of course, do all the right things and have the right luck and everything may turn out golden and you will be very happy to have affirmed your faith in the company. On the other hand, it could lose its momentum or have trouble adapting to breakneck growth. With Lucent I don't have these concerns. It's not a homerun or a strike-out, but a succession of singles and doubles. It's the kind of stock you can put away for the grandchildren and almost forget about.
There are a lot of interesting one-trick ponies out there that are very volatile. At a certain price, they are all worth the risk. But for me, Ciena is not there yet.
But unless you are a momentum player, you might think about approaching an investment candidate the way a potential employee might think about staking his career on a particular company. I can tell you unequivocally that if I were a Ph.D. in optics or EE and had offers from both Ciena and Bell Labs, my response would be "Ciena who?" And never underestimate the importance to that purchasing manager of choosing a solution from a vendor that has been around for a century and still has a solid track record for innovation.
And in case you think your the only one feeling the heat this weekend, take pity on the poor shorts, like myself, who took the heat for the better part of the year and only now are beginning to see some signs of relief.
You can be sure that any market that is growing as fast as DWDM is going to attract a lot of competitors. Until someone can point out to me what particular competitive advantage Ciena has that is going to ensure its place in the sun, I will keep a hairy eyeball on this double-digit PSR wonder. It's not enough to merely say that it is in a fast growing market or that there's enough business out there for everybody.
Have a good weekend, Craig. As long as you stay rational and keep an open mind, you will do the right thing. Try not to panic or celebrate when everybody else is. There's bound to be a reaction.
Take care buddy,
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