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Technology Stocks : Ciena (CIEN) -- Ignore unavailable to you. Want to Upgrade?

To: Michael F. Donadio who wrote (7763)	11/12/1999 9:45:00 AM
From: Ishmael	Read Replies (1) \| Respond to of 12623

Here's the full text November 12, 1999 J.P. MORGAN SECURITIES INC. - EQUITY RESEARCH GREGORY GEILING (1-212) 648-3320 Brantley Thompson (1-212) 648-7883 Ciena (BUY) NEW COREDIRECTOR OPTICAL SWITCH TO DRIVE GROWTH - RAISING PRICE TARGET TO $65 Fiscal Earnings Per Share P/E CIEN 52-Wk ------------------ ------- MkCap 11/11 Rge 10/98 10/99 10/00 4Q/99 4Q/98 10/99E 10/00E Yld ($MM) ---- ----- ----- ----- ----- ----- ----- ------ ------ --- ----- $49.44 $50-12 $0.77A $0.03E $0.52E $0.02E $(0.02)A NM 95.1 NA 7,248 Previous $0.66E Please refer to our 12-page update report, which will be available later today. We believe investors in Ciena will be richly rewarded as the company demonstrates its success in the development of its intelligent optical core-switching product - the "CoreDirector." Although Ciena's DWDM business continues to strengthen with a broadening customer base and industry-leading product offering, we believe Ciena's future depends on its success in the emerging intelligent optical-networking market. The CoreDirector will help Ciena diversify its product portfolio and transition to become a network-solutions-based company. Ciena recently won its first contract for the CoreDirector - a $40 million three-year agreement from Williams Communications - and we believe 3-5 other carriers are currently entering trials. We consider the CoreDirector the key element of Ciena's strategy to offer carriers a complete optical transport (CoreStream), switching (CoreDirector ), and access (EdgeDirector) solution. A critical factor in the successful development of the CoreDirector (and key determinate of Ciena's share price) is Ciena's ability to reach the market quickly. Despite past delays, the CoreDirector remains, in our view, 6 to 12 months ahead of most of the competition. Capitalizing on this lead will generate considerable value for Ciena shareholders, since it would solidify a leading position in a market expected to grow to $9 billion by 2005. Missing this opportunity would create greater uncertainty for investors, as Ciena would then have to slug it out with other very savvy startups and well-capitalized giants. The Williams announcement significantly increases our confidence that the CoreDirector will begin commercial deployment in the second quarter of 2000. Ciena's core DWDM business continues to improve, and we expect further diversification of Ciena's customer base in the next year. The company is beginning to ship its Metro DWDM product for local carriers and limited quantities of its new CoreStream system, which can scale up to OC-192 (10 Gbps). We see the Metro market as a catalyst in the second half of 2000 as traffic from DSL and cable modems forces the RBOCs to step up optical spending. Additionally, the coming fiscal fourth quarter appears to be on track. We believe the success of the CoreDirector has the potential to unlock significant shareholder value. As a result, we are increasing our price target to $65 from $40, valuing Ciena's DWDM business at $20 a share and the CoreDirector at $45. We are also lowering our fiscal 2000 EPS estimates to $0.52 from $0.66 to reflect increased R&D spending for new products that wasn't fully factored into our previous estimates (which were well above the Street consensus.) We reiterate our BUY rating on CIEN shares. First Call Corporation, a Thomson Financial company. All rights reserved. 888.558.2500 ]