<< 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 >>
I did too, don't get me wrong. I was long LU last year for quite a while. (sadly, I sold). I'm not saying LU is a bad investment. I didn't buy LU soley because of their position in WDM however. The explosion seen in their stock price in the nearly 2 years it has been public has had little to do with WDM. Only a fraction of their $35 billion in revenues will come from WDM.
<< Unlike Ciena, it was not issuing pompous press releases weekly about the tremendous benefits of DWDM, even though it had a pioneering role in the underlying technology >>
I'm afraid I don't know what to say to something like that. You have it totally backwards as to who is issuing pompous press releases.
Here is a link to CIEN press releases. If you don't like YHOO's I can supply you with a different link. Now show me where you see WDM press releases every week
biz.yahoo.com
<< Ciena was sprinting for one single reason. It got to market first with a product that the world was hungry to buy >>
True, isn't that what capitalism is all about? Supplying the demand? I might add that it came to market with the BEST solution at the time and is still providing the BEST solution as we speak.
<< But it does not necessarily equate to sustainable competitive advantage >>
Of course it doesn't. It's not about what CIEN has achieved, but what they will achieve going forward. CIEN has the best commercially viable product on the market today. I'm sure someone like Ipsilon or Juniper has come out with a faster/better working routing switch than C$CO, but who can deliver the products that the public needs right now? Cisco. Who can deliver the best WDM that telcos need right now? CIEN.
<< It's much too early to say whether Ciena is made of the same stuff. >>
Of course it is. You will only be able to tell in hindsight. Back in 1990, you couldn't tell if Cisco was going to have the meddle. Back in 1986 you didn't know that Bill Gates was going to be the richest and most well known CEO in America. The whole point I am trying to make is this. At a price of 63, I wasn't interested in placing my money on the line to wait and see if CIEN becomes another Cisco or Microsoft. At 43 I am willing to put some on the line and give them a chance to prove themselves. Barring any other negative developments, if CIEN drops to 33 I will put even more money on the line. I imagine you might buy some CIEN if it was at 20. (or 10--pick a number). So it only becomes a question of: at what price does CIEN meet your criteria for a favorable balance of risk/reward. The low 40's suits me for a purchase. Not such a favorable risk/reward that I am going to sink all of my money into it, but it is a useful starting point.
<< Your analogies to Cisco and IBM are not compelling >>
Of course they weren't for you. You don't want to hear how the large tech leaders of today can be outmaneuvered and have circles ran around them by the little guys. Doesn't fit into your scenario of LU taking all the WDM business for themself and enriching your holdings.
<< Remember that Cisco essentially invented networking >>
No they didn't. Contrary to what many believe, there was networking prior to Cisco. IBM used to be considered the #1 networker. Cisco made it famous. Big difference.
<< Then it had the skill to have a management which realized that it did not have a monopoly on good ideas >>
What has that statement got to do with Ciena?
<< 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). >>
Of course you don't. Nobody ever sees it when things are going good. Only after a company like CIEN grows 10 fold and a company like LU starts to lose money and fall from grace do people suddenly say, "What the hell happened?". Now I can't say that LU is going to fall by the wayside the way IBM did, but on the other hand you can't say that CIEN won't turn out like C$CO did. Lucent has already demonstrated that they are behind CIEN in WDM. Is your argument that LU will take the lead from CIEN based soley their size, intellectual property, and financial strength? That obviously isn't enough. When IBM and DEC got their clocks cleaned by much smaller more entrepreneurial companies they had thousands of patents, billions of dollars, and tens of thousands of employees just like LU does now.
Didn't do them any good.
<< I have no idea where Ciena will be in 5 years time >>
Neither do I, but I bet you don't know where LU will be in 5 years yet you still choose to invest in them. I don't know where CIEN will be in 5 years but I choose to invest in them.
<< 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. >>
People used to think that about DEC. Heck, RCA used to be the tech stock to own. So did NOVL. Some work out and some don't. Part of it's luck and part of it's foresight. It never hurts to have both on your side.
<< 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. >>
You are sadly mistaken if you think CIEN is a one-trick pony. A company doesn't have to do 80 million different things and have tens of thousands of employees and even more patents to become a good investment. What patent does DELL own that makes them so special? What are all the neat tricks that they perform? They put together computers and servers and they sell them better than anyone else. That's it. A great stock doesn't have to have a P/S ratio under a certain figure either. Great investments come in all shapes and sizes.
<< 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 >>
What is wrong with buying momentum stocks? You pick the right one and sometimes the momentum never ends. Witness Cisco, Dell, and Microsoft.
<< 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?" >>
That's where you and I obviously differ. I would say "Lucent who?" Perhaps it is the differences in our age or personality, but if I had a job offer from LU and CIEN I would think:
1) Lucent has a market cap of $66 billion. CIEN has one slightly over $4 billion. In the next 5 years what are the odds that Lucent can grow it's market cap to $660 billion? Not nearly as good as CIEN growing theirs to $40 billion. They both have reasonable odds of doubling or tripling their market caps.
2) I would think to myself, At Lucent, what are the odds that I will be noticed being employee number 134 thousand + 1? At Ciena, how much better are my odds of making a splash when I'm only employee number 1000?
3) What are my odds of being one of the 10,000 people that get laid off when LU decides that 10% top-line growth isn't enough to drive earnings and job cuts are needed?
4) What are my odds that Lucent will decide I'm more useful over in this part of the country or that part of the country? That I should go to this division or that division?
I think we saw a perfect example of this in the artcile that was brought to this thread showing the person that left ALA for CIEN. Another example would be my neighbor, who left Nortel's wireless division to go work for a small start-up with no revenues.
<< 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 >>
If that's the case then why is T even bothering to use CIEN's WDM products? Why not just stick with their offspring LU? Purchasing managers are going to buy what best suits their needs at the present time. They don't have 6 or 9 months to waste letting their network jam up while they are waiting for LU to get their 80 channel product out.
<< And in case you think your the only one feeling the heat this weekend >>
What makes you think I am feeling any heat? I'm excited, can't you tell? I've been patiently waiting for months for CIEN to drop to levels where I can buy for something other than a trade. I pumped! I hope it drops 5 more points!
<< You can be sure that any market that is growing as fast as DWDM is going to attract a lot of competitors >>
I would hope so. Show me a business without lot's of competition and I will show you a business that probably isn't very profitable. LU scrambling to try to catch up to CIEN only goes to show how revloutionary WDM and AON's will be!
<< Until someone can point out to me what particular competitive advantage Ciena has that is going to ensure its place in the sun >>
Until someone can show me what LU or anyone else has that will block Ciena's sun...
It sounds to me like you are making a case for not investing in any tech company that hasn't been around for decades, has a gazillion patents, and billions in revenue. That would have kept you out of CSCO at 25 cents, Microsoft at around a dollar, and Dell at 50 cents.
<< I will keep a hairy eyeball on this double-digit PSR wonder. >>
Was double digit.
<< 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. >>
Obviously there is nothing that will convince at this time. We will have to wait. Maybe in 10 years when CIEN has a market cap the size of Lucent will it meet your qualifications for a good investment.
<< Try not to panic or celebrate when everybody else is. There's bound to be a reaction. >>
I guess I don't understand what your getting at. What I have heard on this thread is "This dogs day is done". "See you at 20 in 1999", etc.
I have merely stated (enthusiasticly I might add) that CIEN was too expensive for me 12-15 points ago and now it's at a level where I can deal with it. Now what's the harm in that?
Best wishes,
CC
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