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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: gdichaz who wrote (9951)	11/8/1999 12:17:00 PM
From: StockHawk	Respond to of 54805

Cha2, Informative post. Thanks. A couple of questions, if I may: >>I have searched and searched in the fiberoptics jungle and have found no gorillas yet... ...I also hold others which I see as having a bright future but are younger and have perhaps even greater price appreciation potential.<< Are there any other companies in the fiberoptics jungle that, in your opinion, have king-potenital? Would you mind telling us which companies may possess "even greater price appreciation potential" and are these potenital gorillas, kings or especially shiney pebbles? Thanks StockHawk

To: gdichaz who wrote (9951)	11/8/1999 12:34:00 PM
From: chaz	Read Replies (1) \| Respond to of 54805

From Chaz1 to Chaz2, I would like you to know that you have my undivided. But you were a mite late. This morning, I sold (in my son's accounts which I manage) all his MSFT and CSCO, replacing them with Q. Come January and fresh money in the Roth, we'll add JDSU.

To: gdichaz who wrote (9951)	11/8/1999 1:28:00 PM
From: FLSTF97	Respond to of 54805

Idle ramblings on JDSU... I was just thinking to myself and thought I'd propose these ruminations to the group for amplification. Please keep in mind that I'm not stating the following as fact and that I have not investigated JDSU very thoroughly(yet): Are we sometimes thinking too narrowly when we judge factors like switching costs or proprietary solutions? Consider JDSU and switching costs: We (I think) judge switching costs often by the most superficial levels: Direct cost to replace hardware, write new code, and maybe training. But it maybe that the customers rate other "costs" as more important such as: time to market, resource allocation away from your core strengths, wasting resources in trying to circumvent competitive IP. So let's assume you are a JDSU customer, they can supply the whole solution, and you are more or less content with its performance. To even think about switching involves putting together a team of experts (this type of buy will not be done by the purchasing agent as I think it will be quite some time before it is a main street product)who will need to perform extensive evaluations. Clearly this is a significant reallocation of resources, but let's say they are successful and find a better horse. How much better does the horse need to be to risk being later to market or missing some opportunity altogether? If that is my decision, it would have to be an awful lot better. Intel had a requirement that they wouldn't even consider (key word:consider that doesn't mean implement) a change that offered less than a 30% improvement. In retrospect that is probably not a bad policy (depending on product life cycle. Bottomline is that perhaps for JDSU the risk alone associated with change may be enough of a hurdle in regards to switching costs. Does JDSU have proprietary architecture? I have no clue, but wonder if the combination of "whole product" and much larger market share wouldn't constitute a de facto proprietary architecture? If as has been posted JDSU is the only company that can provide a one stop shopping experience, and the market is consistently voting for their products, the lowest risk path would be to adopt them. Anything else forces you to apply your own resources to cobbling together the entire product. Even if one doesn't buy that argument, how unlikely is it that once a company has acquired the individual parts of the solution it will then not take the next logical step and tightly integrate them (a la MSFT with the office suite... let's not quibble over the definition of "tightly" please)? Assuming that that produced a successful product progression, this new whole product would certainly be at least incrementally more proprietary. The idea of a customer pulling parts out swapping with others subcomponents is extremely unlikely. So if these precepts are a valid interpretation of those elements, perhaps we need to reconsider JDSU's potential for gorilladom. BTW, It is JDSU's balance sheet (goodwill) that led me to decide not to buy them. The OCLI purchase will worsen that situation. Of course I made that decision back when the stock sold for $80 something...just call me "genius"! Fatboy (aka "Fathead")

To: gdichaz who wrote (9951)	11/8/1999 8:56:00 PM
From: snoozlooze	Read Replies (1) \| Respond to of 54805

JDSU...Are we sure it's not Big and Hairy? From the JDSU thread... "Off MF: BARRIERS TO ENTRY (OR, WHY JDSU WILL WIN) A. Patents JDSU owns or exclusively licenses at least 470 patents relating to optoelectronics and photonics. (Uniphase was reported to hold or license 421 patents, and an online search revealed at least 49 patents held by JDS Fitel.) I have not gone through any of these patents, but some reports indicate that a number of these are ground-breaking, particularly in the area of fiber Bragg gratings. B. Top-notch Staff There are a limited number of scientists who can perform the research, development and manufacturing necessary to compete in this field. An enormous number of these scientists work at JDSU - the reports indicate that Uniphase had 116 optical scientists before the JDS Fitel merger. JDSU's continued success relies on keeping those employees happy, but given the company's cutting-edge work, its dominance in the industry, and its stock performance, that probably is not a problem right now. I don't know how many top-notch optics labs exist out there, but a potential competitor would have to get its scientists from somewhere. This would be difficult now, but it will get even harder as JDSU implements its announced plans to expand through further acquisitions. JDSU has not only shown a willingness to move fast, but also, like many of the internet companies today, it has the power of a high-flying stock to use as currency for acquisitions. C. Technological Barriers Virtually every technology or internet company claims the difficulty of duplicating its technology as a barrier to entry. Much of the time, this is complete BS, but in the case of JDSU, it is truly an enormous barrier to entry. Even ignoring JDSU's patents, the logistical and technological challenges of making these components is overwhelming. Active components such as lasers are created in reactors by precisely flowing layer after microscopic layer of gas over a semiconductor wafer, precisely chopping the wafer into thousands of individual pieces, processing each piece to form a laser, and then packaging and testing each one individually. Although it requires great scientific knowledge, it also requires an almost artistic "touch" which comes only from experience - my former clients at Xerox PARC compared it to alchemy. Even making these components would be a huge challenge for any new competitor. Manufacturing the components with enough reliability and volume to challenge JDSU would be a far greater feat. Many of these components are required to perform for 100 years without failure, which is an incredibly difficult engineering feat. (Try and think of any electronic component you know of that could run continually for 100 years without failing. It's hard.) Producing them in bulk is even harder. As an example, one analyst report indicates that JDSU is the only qualified supplier of 980 nm pump lasers and submarine qualified fiber Bragg gratings. (During the recent conference call, CEO did not remember for sure whether JDSU was still the only one.) D. Size JDSU is more than twice the size of any of its competitors. This presents a number of strategic advantages. First, it has the ability to make the enormous capital expenditures necessary to keep up with demand in the industry. JDSU will be spending millions of dollars to expand its capacity across its entire product line. Competitors such as SDL are selling all they can make, but do not have the financial capability to ramp operations to the extent that JDSU does. Second, JDSU's sizes gives it the ability to offer an incredibly broad product line that no one can match in the industry. This allows its customers the convenience of one-stop shopping. It also allows it to accommodate its customers by, for example, keeping large inventories of products at the customer's site on a consignment basis; a smaller operation would have neither the manfacturing capacity nor the cash flow to allow this. Furthermore, as JDSU's product line becomes more and more complete, it is able to vertically integrate upwards, offering more and more complete modules to its customers. For example, JDSU is beginning to sell completed EDFA modules, rather than just pump lasers, to its customers. JDSU is also designing other modules, such as configurable multiplexers, switching modules, wavelength lockers; and dynamic add-drops, generally working with the customer to custom-design a solution. No competitor appears big enough to do this on any kind of scale." Gorilla? Maybe? As always, Good Luck to all snooz