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Technology Stocks : Nortel Networks (NT) -- Ignore unavailable to you. Want to Upgrade?

To: SJS who wrote (7404)	10/24/2000 5:41:49 PM
From: pat mudge	Read Replies (1) \| Respond to of 14638

I suspect NT's announcement that they're spending $2.5 billion to ramp their component business scared investors into thinking this would impact SDL and JDSU. Roth made it perfectly clear this wouldn't be on line for 15 to 18 months and would be primarily to guarantee a second source for internal and partner use. There were questions regarding acquisitions to augment this part of their business and Roth didn't rule that out. There were multiple comments in the call regarding the explosive growth in the sector. Remember, being copied is the highest form of flattery. SDLI and JDSU are the leaders. No one has their expertise. And this is a sector where experts are in short supply. You can't just wave money over a group of engineers and expect them to compete with companies that have been honing their skills for decades. If I were short going into this conference call, I might be asking myself how NT's report might reflect on JDSU's. Let me quote from the call: Q: Tightening of supply in optical components b/c of merger activity, can you shed more light on that and what it may mean to optical systems re: revenue growth; $2.5b. for optical components business, how did you generate what you thought market pricing would be? A: A lot of mergers going on between multiple sources. We want to buy freely in the market place. As choice narrows it makes sense to have our own sources. If we can buy why tie up capital to make our own. If supplies tighten we want to insure we’ll have a good choice of supply at these very very high volumes we’re looking at. We know what it would cost us to make parts we buy and what margins and we apply them to our own parts when we come up with that number. . . . And later in the Q&A: When we’ve increased output our suppliers have increased their output 150%, too. Suppliers have put a lot of capacity in place for us. Don’t want to take anything for granted. We are not concerned this year. We’re looking out a few years and looking at demand and want to make sure we have dual sources. We don’t want a storm or some event that takes someone down. This refers to 15 to 18 months. There's a lot of water that has to flow under the bridge before NT has enough component capacity to meet its own needs and that of its partners. In the meantime, JDSU and SDLI are making footprints that will be hard to erase. Pat