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Technology Stocks : SDL, Inc. [Nasdaq: SDLI] -- Ignore unavailable to you. Want to Upgrade?

To: SJS who wrote (1504)	5/30/2000 6:26:00 PM
From: pat mudge	Read Replies (1) \| Respond to of 3951

RadioWallStreet interview with UBSWarburg analyst, Nikos Theodosopolous. One question, if JDSU needs SDL's laser chips for its 980nm amplifiers, what prevents their customers from going directly to SDL for the amplifiers? Seems to me they'd get a better price. (Though not sure anyone has capacity to meet the overall demand.) Also, if SDL can make enough chips for JDSU, what has prevented JDSU from meeting its own needs? Which facility(s) is involved? Is this the Australia factory? Have there been any certification issues? >>>> SDLI has been supplier of laser chips to JDSU, mfg of optical amplifiers. Contract was targetted to expire at end of year. Now extended to 2001. Good for both. Indicates strong market for opt. amplifiers. So much so JDS will have to buy from SDL even though it makes its own. JDSU can't make enough of its own. Forecast through next year. Contract will double. Market growing by 100%. What about estimates? Just raised for 2000 form 1.04 to 1.20. 2001 raised to 1.68 from 1.45. Good healthy jumps. Target price is 265. Still upside even with big moves. How do you value these stocks? Valuations are difficult in this sector primarily b/c growth is not something we've seen in any other sector for companies of this size. SDL and JDSU are growing revs. of 20% sequential. That's 100% y/y. It's not likely to slow down. We are looking at 2001 estimates and some multiple over 100 based on how fast they're growing relative to competitors. SDL is the fastest growing of the optical components companies. JDSU, how do you see their earnings? For 2000 (june end) est. .40 and for 2001 about .60. If you look at calendar 2001 basis ( to compare apples to apples) JDSU is 120X 2001 (growing at 100%). Other premier players in their sectors. CSCO at 50X and growing at 50% on 2001 earnings. JDS not out of whack when compared to other lead players. Too early to call them the 800 lb gorilla? No, they have broadest product portfolio and the largest revenue mass. Capacity issues? Anyone else you're positive on? Corning is the other big player. They also make laser chips and also buy them from SDL. We wouldn't be surprised to see Corning extend its contract with SDL as well, even though we've not seen formal announcement --- based on sheer demand. Length of growth cycle? Think it's hard to predict technology over a year out. Things change quickly. Over next year we're comfortable growth is strong and over 5 years it'll remain solid. Can't call 100% for the next 5 years. That's too aggressive. We're looking at 50% now. Some have 41% which may have to go up a bit now. JDS, as long as they show 20% seq. growth and earnings that follow the trend, you'll see premium PE stay up there. Market has corrected many stocks. JDSU has to show technical support. Holding well in 75 to 85 range. What happens when buildout is over? A lot of concern re: what happens. . . Buildout -- its hard to say when it will be over. We'll develop new ways to communicate and we'll need infrastructure to do that. Not going to build out. What about Lucent and Chromatis? It's speculation at this point. We understand why they're talking. LU has fallen behind NT and CSCO --- they've made lots of acquisitions. LU's looking to acquire in that market. Chromatis fits. Will LU be likely to come back? A bit early to say they've turned the corner. Stock is washed out. Not much downside from here. They're going to have to show progress. Need a catalyst to get stock going. Will have to deliver solid competitive products in the market. We have hold rating right now. Earnings? We're at 1.20 for year. Co. making changes. Estimates are reflective of our scenario. Sector as a whole? Strong year for telecom equipment. US growing 15 to 25%, this year in high end of range. Add on top the rebound of emerging markets and we'll see strong multiple-year earnings and growth.