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Technology Stocks : JDS Uniphase (JDSU) -- Ignore unavailable to you. Want to Upgrade?

To: pat mudge who wrote (13666)	10/28/2000 8:49:57 AM
From: John Carragher	Read Replies (1) \| Respond to of 24042

Barrons article. Lights Out! SDL's downdraft darkens performance record of scores of growth fund By David Franecki Scoreboard \| Fund Scope \| Cash Track Fiberoptics networking stocks went from champ to chump last week, and some go-go growth funds are hurting as a result. Optics stocks, almost without exception, have been the darlings of growth and technology mutual funds both this year and last, and until last week SDL was one of the best performers, having risen threefold in 2000. The stock found its way into the top 10 holdings of 69 funds, according to Morningstar, and is held in nearly 250 funds altogether. But last week San Jose-based SDL, which makes lasers and amplifiers for fiberoptics communications systems, took back much that it had given its fevered fans. The stock plunged 25.5%, to 252.63, including a drop of 26% on Wednesday. Optics stocks were down across the board after Nortel reported lower-than-expected quarterly revenues. The news crushed Nortel's shares as well as those of JDS Uniphase, which is in the process of acquiring SDL. Growth-fund managers know this game by now, riding home-run stocks like SDL to the top of the charts one year, only to see them fall to the bottom the next. The only good news to emerge last week was Thursday's strong earnings report from JDS Uniphase. Surprisingly, fund managers who own SDL and other optics stocks weren't falling over themselves to call the carnage a buying opportunity last week. That's been the Pavlovian response of many investors when such cataclysms have happened in the past. Yet, as noted, such talk was conspicuous by its absence, as an unscientific sampling of scathed fund managers revealed. "It certainly is gut-wrenching, but it's part of the market," said Peter Conrad, an analyst at Kopp Investment Advisors in Minnesota. SDL accounted for a massive 14% of Kopp Emerging Growth Fund's $1 billion in assets. Conrad doesn't see anything wrong with SDL's fundamentals, but Nortel's announcement for the first time raised some questions about the demand for fiberoptics. That proved problematic because the stocks' rich valuations insinuated that "the outlook is perfect," Conrad said. In fact, the outlook is far from perfect, although Kopp is neither selling nor buying SDL as a result of the change in the share price. The Nortel announcement, combined with earnings disappointments from Lucent Technologies and other onetime industry stalwarts, have investors worried that overall spending for communications equipment will slow in 2001. Bruce Bartlett, whose $3.8 billion Oppenheimer Growth Fund counts SDL as its No. 5 holding, said he expected a slowdown in the optics space next year, but that the Nortel announcement has forced the issue. "It came sooner and with more force and velocity than we would have anticipated," he concedes. The structure of the optical-component supply market, which JDS Uniphase dominates, will change dramatically in the year ahead, with as many as five companies entering the fray. With a multitude of new companies hoping to come public, earnings disappointments are likely to rise, Bartlett said. Some of the fund companies hurt most by SDL's skid were Putnam Investors, Janus, AIM Management and Invesco. All declined to comment for this story.