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Technology Stocks : MRV Communications (MRVC) opinions? -- Ignore unavailable to you. Want to Upgrade?

To: akmike who wrote (24062)	9/19/2000 6:07:47 AM
From: Mike E.	Read Replies (2) \| Respond to of 42804

From Israeli Investor: Barron's Takes the Low Road Mark Savolainen Smith 9/19/2000 03:20 Infamous short-seller given cheap shot at MRV Communications Just as creeping sensationalism has found a home on major network television in the USA, Springeresque journalism is finding its way into heretofore respected financial press. Case in point is this week's Barron's article on MRV Communications (MRVC) by Bill Alpert. Titled "Optical Illusion?", Mr. Alpert's article purports to offer analysis on MRV, while simply handing the forum over to Mark Roberts, an infamous short-seller of MRV. This is the journalistic equivalent of Jerry Springer handing the mic over to the "other" party in the interest of equal air time/entertainment. While entertainment purposes may have been served, unfortunately Barron's issued no disclaimer, passing off innuendo and shallow analysis as in-depth reporting. One hardly knows where to start in attempting to sort out this hatchet job, but Alpert/Roberts' claim of past MRV accounting irregularities is perhaps as good a place as any. One may imagine how MRV's CFO feels about having his responsibilities (MRV's accounting practices) be described by Barron's as having "long stirred controversy" when such very serious allegations are presented with only Mark Roberts to back them up. Without editorializing, here are CFO Edmund Glazer's comments: "The only controversy was in the mind of Mark Roberts. No other publications ever questioned our accounting. We have always scrupulously followed generally accepted accounting procedures and have not applied them any differently than Nortel, Cisco and 100 other of the largest companies in our industry. MRV has had the same auditors, Arthur Andersen, since we went public 9 years ago and we enjoy excellent relations with them. The SEC has never challenged or told us to restate any of our financial statements." Enough said. Moving on to valuation analysis, Alpert/Roberts pegs MRV as worth $12.50 per share (MRV recently closed @ $53 5/8). How did Alpert/Roberts derive this $12.50 valuation? This is not exactly clear, to put it kindly. Starting with Luminent's $14 IPO price, Alpert/Roberts value MRV's 91% Luminent stake @ $2.2 billion. To this is added MRV's "just over 20%" of Zaffire at $175 million, giving a total of $2.375 billion. Given the latest MRV share count of roughly 74 million, the resulting share value is a little over $32 according to my calculator. How DID Alpert/Roberts get to $12.50? They provide no explanation other than doubts about Luminent's $14 IPO price and expectations of little other value provided by MRV. Others see the MRV valuation quite differently. Chet White of First Security Van Kasper (FSVK), the most knowledgeable analyst following MRV, thinks Luminent's value alone might be equal to MRV's total market valuation today. To this is added Zaffire and MRV's other 12 subsidiaries and investments. Included among these (and notably missing from the Alpert/Roberts' analysis) are Optical Access (Wireless Optical Systems), iTouch (Broadband Access), Charlotte's Web (Terabit Routers), Zuma Networks (supercomputer switch router), Hyperchannel (business to business e-commerce), and RedC Optical. Taking all the pieces of MRV into account, FSVC recently reiterated its buy recommendation based on its sum-of-the-parts valuation for MRV with a price target of $158 within 12 to 18 months. Time will tell whether Alpert/Roberts' $12.50 or FSVK's $158 is closer to the mark. In the meantime, MRV shareholders should be reassured that the latest Market Guide listing of institutional holdings (6/30/00) shows Fidelity as MRV's largest institutional shareholder, owning over 7 million shares. Fidelity has a reputation for doing it's homework. Also, those investing in MRV partner companies include some of the most astute in the world. Luminent's top-tier underwriters include Credit Suisse First Boston (CSFB), Oppenheimer, Bank of America, Robertson Stephens and Piper Jaffray. Zaphire strategic investors include Kleiner Perkins Caufield & Byers, Juniper Networks, Morgan Stanley Dean Witter and Co., Bank of America Securities, and Oppenheimer as well as Vitesse Semiconductor Corporation, Williams Communications and ETEK. Charlotte's Web investors include Sycamore Networks, Williams Communications, and CSFB. The lists go on. Apparently, some very knowledgeable people have decided that MRV's technological expertise is no "optical illusion." Roberts' previous targets have included a specialty finance company, a luggage maker, a vendor of pillows and other bedroom gear, a towing company, a maker of disposable latex gloves, a yogurt retailer and AOL. This makes him an expert on optical networking? Jerry Springer would love it. Source: israelinvestor.com