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Technology Stocks : Alcatel (ALA) and France -- Ignore unavailable to you. Want to Upgrade?

To: Gayle Riggs who wrote (2079)	7/2/2000 3:45:01 PM
From: pat mudge	Read Replies (1) \| Respond to of 3891

ALA appears to me to be coming on strong and LU may be the sleeper with its current problems. I'm not sure if LU's the sleeper or not. More likely ALA's the sleeper as it's been an optical leader for a long time but hasn't been appreciated by the Street. I play ALA's strength by investing in SDLI, my largest holding. They have a long-standing exclusive partnership for undersea components. The recent DBAlex-Brown Optical Networking Report lists the following statistics for DWDM (shipments in $billions): Espected growth from 1998 to 2003 North America: $2.0 to $15.0 Europe: $.30 to $3.0 ROW(Rest of World)$0.0 to $1.0 Submarine: $3.0 to $22.0 (Numbers may be a bit off as I'm reading off a graph) The report goes on to say: The most significant technological advancement that led to the development of second-generation optical networks was the introduction of a multiplexing technology called Dense Wave Division Multiplexing (DWDM). DWDM technology splits a single optical beam into multiple wavelengths, thereby creating "virtual fibers" and thus dramatically increase the capacity of the network. Four years after its introduction, DWDM is a proven backbone technology, increasing capacity in the long-haul network. The market for DWDM equipment has grown rapidly since its introduction and is estimated to have grown from $5.3 billion in 1998 to $8.8 billion in 1999, according to RHK. Most of this growth has come primarily from the long-haul market. Based on the explosive network buildout activity taking place in the undersea market and the potential market for DWDM in Europe and Asia, RHK estimates this market will grow to $41 billion by 2003, a compound annual growth rate of 51%. Despite the success in the backbone of the network, DWDM has not yet been able to penetrate at the metro level, primarily due to economics. Industry experts expect the metro DWDM market to become meaningful by 2001. The statistics I posted yesterday list Alcatel's submarine share at 37%. Is it any wonder Lucent's scrambling to catch-up? The beauty is that the barriers to entry are extremely high and displacing a leader is not easy, especially when you consider the lead-times necessary to get designed into carrier systems. As for valuations of the components' companies, most are growing so rapidly analysts can't keep up with the numbers. With SDLI, for example, none have factored in the increased capacity at PIRI and Veritech beyond one quarter. When you consider PIRI is being increased by I believe a factor of 5 (one line/one shift/five days to 2 lines/three shifts/seven days) and Veritech by a factor of 7 (18K sq. ft to 133K sq. ft), you can see why estimates are meaningless at this point. They're outdated almost as fast as they're published. Pat