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To: Suresh who wrote (28405)	9/24/2000 4:16:57 AM
From: Johnny Canuck	Read Replies (2) \| Respond to of 67789

SEPTEMBER 22, 2000 Tellium Bids for $250 Million IPO -------------------------------------------------------------------------------- After three weeks of pumping itself up with announcements of customers, Tellium Inc. (proposed Nasdaq: TELM), an optical switch vendor based in New Jersey, today filed with the Securities and Exchange Commission to raise as much as $250 million in an initial public offering. In the last two weeks, the startup has landed huge deals with two of the biggest carriers around: Qwest Communications International Corp. (NYSE:Q) and Cable & Wireless (NYSE: CWP) (see Is Tellium Ready for an IPO? ) and (see Tellium Gets $350M C&W Deal ). Clearly, these deals gave Tellium more credibility, but the S-1 filed today points to some weaknesses in the contracts. First of all, there's the matter of Qwest and Extant as shareholders in Tellium. As part of the agreement with Qwest and Extant, the carriers both received substantial shares of pre-IPO stock in the company: 2 million and 5.2 million of them, respectively. Additionally, Qwest executives were also given a combined 333,333 shares of stock. Additionally, the contracts have the peculiar effect of giving equity rewards to the customers for Tellium's performance. “The warrants to purchase 2,000,000 shares were vested when we issued the warrants and become exercisable as Qwest meets specified milestones during the term of our procurement contract,” says the S-1. The fact that the shares can only be exercised as the carriers deploy equipment has surprised some analysts. “It’s unusual to say the least, and it's sure to raise eyebrows for the appearance of impropriety,” says Chris Nicoll, VP at Current Analysis. “You’re not rewarding employees, but rather rewarding customers for continuing to buy your product.” Tellium, founded in 1997, had revenue of $5 million and losses of $19.8 million for 1999. In the six months ending in June, it increased revenues to $7.5 million, but still had losses of $19.4 million. The offering, which is expected to raise $250 million, is being led by Goldman Sachs (NYSE: GS). Until recently, Tellium only had two customers: Extant Inc. -- bought by Dynegy Inc. (NYSE: DYN) -- and the U.S. Department of Defense. While its 512-port Aurora Optical Switch has already been shipped to Extant, Tellium has yet to realize any revenue from the product and won’t until the first quarter of 2001 (see Tellium Ups the Ante ). Other parts of the S-1 reveal that the contracts won by Tellium are full of loopholes. For example, the agreement with Cable & Wireless gives C&W the right to reduce its minimum purchase from $350 million to $200 million if Tellium doesn’t “maintain a technological edge” over its competitors. The agreement also permits C&W to terminate the agreement upon breach of a variety of unnamed obligations under the contract. Basically, this means that C&W is not bound to the agreement, if it feels that another technology or another product is more cutting edge than the Tellium equipment. And with only three vendors signed on to even potentially contribute revenue, the loss of one contract could be devastating to the company, warns the S-1. “There are always outs in those contracts,” says Mark Lutkowitz, president of Trans-Formation Inc., a consultancy. “I don’t believe any of these announcements until I see the product has shipped and is deployed in the network.” -- Marguerite Reardon, senior editor, Light Reading, lightreading.com

To: Suresh who wrote (28405)	9/25/2000 12:48:30 PM
From: Johnny Canuck	Respond to of 67789

Not sure I buy this rally. The advance this morning was even more narrow than Friday's action. AMCC and TXCC made new highs but nothing else. CSCO, LU, and MSFT still remain flat to slightly down. As Clint mentioned, COMPX does not make a sustained rally without them ******************************** CoSine (COSN) : With the success of two highflying IPOs last week (InRange and OmniSky), investors are apparently ready to focus again on the IPO market. This week's headliner should be CoSine Communications, which sells the switches and software that allow network service providers to offer Internet services including firewalls and virtual private network encryption. There is a lot of interest in the issue as on Friday the company raised the expected offering price for the second time. The initial range was $13-$15, then was raised to $15-$17 on Sep 5 and now stands at $20-$22. Infonetics, a market research firm, expects service providers will spend $339 million over the next year on equipment such as Internet protocol service switches with CoSine being the number one player in the space....Bear in mind this is a new company as it began shipping products and recognizing revenue during the first quarter of 2000. Also, substantially all of its revenue ($11.3 mln) during the first six months of 2000 were from sales to only two customers and this may not change for a while until it can penetrate additional accounts. While the company is in a strong market leading position, competition is increasing from the likes of Cisco, Lucent and Nortel....This deal has a relatively small float of 10 mln shares and is a Goldman-led deal.....If you buy the stock which will price later this week, there are some dates you will want to keep in mind. Of the 100 mln shares that will be outstanding after the deal opens, 15% of these shares may be released from the lock-up as early as 2 days after its Q4 release and an additional 25% may be released from lock-up as early as 30 days after the Q4 release and the remaining will be unlocked in 6 months....Overall, we expect the company to have a nice pop on the first day of trading. -- Robert J. Reid, Briefing.com