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Technology Stocks : ORTEL -- Ignore unavailable to you. Want to Upgrade?

To: James Fulop who wrote (614)	12/23/1999 10:13:00 AM
From: James Fulop	Read Replies (1) \| Respond to of 659

Courtesy wolvmar on the Yahoo thread... >> 08:57am EST 23-Dec-99 Cruttenden Roth Inc. (D. Kang 949-720-7186) ORTL ORTL: Company Update Current Rating: Strong Buy 2000 Price After our recent discussion with Ortel Corporation's management, we believe that the Company is having a solid quarter. A recent announcement about an exclusive agreement with Lucent Technologies (LU-$76 1/2) should accelerate its revenue growth. In addition, our recent visit with Tellium's management, coupled with a string of acquisitions in the optical networking industry, gives us the confidence that the valuation for Tellium could be in a multi-billion dollar range. We continue to rate the stock a STRONG BUY. HIGHLIGHTS: * Redback Networks (RBAK-$162) agreed to buy Siara Systems for $4.7 billion. * Nortel (NT-$98) agreed to buy Qtera for $3.25 billion U.S.dollars. * Cisco (CSCO-$102 1/2) agreed to buy Pirelli's optical systems unit for $2.15 billion. ANALYSIS: Ortel recently announced an exclusive agreement with Lucent Microelectronics Group for next-generation uncooled 980 nm pump lasers used in metro optical network applications. Although detailed information will not be available until the company's quarterly conference call, we know that this is a multi-million dollar agreement in which Ortel will supply fully qualified 980 nm laser chips to Lucent. In turn, Lucent will package the chips into pump modules and plans to sell them externally, as well as consume internally. Tellium also had a major announcement last week. It announced a strategic agreement with Lucent, in which Lucent will distribute Tellium's Aurora optical switches, StarNet Restoration Software, and other software modules to the worldwide marketplace. This is a two-year agreement. We believe this is a win-win situation for both companies. Tellium gets to leverage Lucent's gigantic infrastructure, while Lucent adds a very critical optical product to its portfolio. Even when Lucent's own LambdaRouter becomes available in 2H00, we believe Aurora and LambdaRouter will complement each other. For example, Aurora offers grooming and wavelength translation features that would enhance LambdaRouter's all-optical features. Tellium is in a ramp-up mode. It recently moved into a larger facility, and plans to increase its headcount considerably. It has shipped 11 Aurora 32 units to date, and has approximately 60 more units on backlog. Regarding Aurora 512, Extant should begin the testing in April 2000. Assuming the testing goes smoothly, we can expect shipment to begin in 3Q00. We believe Tellium is the first company to introduce a 512-port system. Our understanding is that Cisco's Monterrey and Ciena's (CIEN-$60) Lightera have a 256-port system while Sycamore (SCMR-$296) is close to introducing a 512-port version. There have been several significant acquisition announcements recently. First, Redback agreed to buy Siara Systems for $4.7 billion. Siara was formed in June 1998, and has been working to develop a product that addresses IP-over-SONET. Although Siara has not unveiled any product that we are aware of, we believe Siara is working with Qwest (QWST-$43 13/16) for its access network. Second, Nortel agreed to buy Qtera for $3.25 billion. Qtera is another startup that is closely working with Qwest. Qtera's claim to fame is its ability to send optical signals for a very long distance without regeneration. Although its system offers some optical switching capability, we believe it is mainly for protection. And lastly, Cisco agreed to buy Pirelli's optical systems unit for $2.15 billion. In addition, Cisco will invest $100 million in Pirelli's optical components unit and undersea cable business for a 10% stake in each. Analyzing the latest series of acquisitions, we believe the price for the optical technology has gone up considerably in the last few months. Just back in August, Cisco was able to buy a quality optical switch company in Monterrey for only $0.5 billion. In addition, the value is in the optical switches, not DWDM transport equipment, in our opinion. Eventually, we believe that the DWDM transport functionality will be integrated into an optical switch. We believe this is one of the reasons for Lucent to distribute Tellium's product. With the price for the optical switching technology soaring, we believe the valuation for Tellium should increase accordingly. In our last update, we gave a valuation of $3 billion for Tellium. We believe that $3 billion is a very conservative number considering Sycamore's valuation is over $20 billion. In addition, with the Lucent program, we believe the valuation for Ortel's core business deserves a higher valuation. As a result, we continue to rate the stock a STRONG BUY. << messages.yahoo.com