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

To: Techplayer who wrote (8610)	11/17/2000 2:22:26 AM
From: CIMA	Respond to of 14638

Optical-Networking Stocks Undergo Worrisome Blips The Baltimore Sun The adage that "all politics are local" could just as easily apply to economics. Consider the recent sell-off in optical-networking equipment stocks. Sparking the decline was Nortel Networks Corp., a Canadian company whose third-quarter sales happened to come in just short of Wall Street's hyper-inflated expectations. Nortel's shares dived 29 percent in a single day, and the shock waves were felt by Maryland companies in that same niche: Ciena Corp. shares dropped 20 percent, while Corvis Corp.'s stock dipped 9 percent. Though Ciena's and Corvis' shares have both rebounded to their pre- scare levels, Nortel's stock has not. And there's considerable worry that industry-wide sales in this sector - a key one to the Internet's continued development - may slow too much to support the steep valuations some of the company's stocks still sport. Just last week, a study done by telecommunications industry analysts Ryan, Hankin Kent Inc., projected that sales growth for optical-networking equipment would slow from a torrid 42 percent in 2001 to 19 percent in 2002, 17.5 percent in 2003 and just 11 percent in 2004. Since Maryland has established an economic strength in some of the faster-growing portions of this sector, the state has a growing stake in the fortunes of the optical-networking industry. In addition to the publicly traded Ciena and Corvis, there are privately held start- ups that may become major employers. "We're still growing at a steep rate," says Susan L. Trumbule, chief executive officer of iPhotonics Inc., a Glen Burnie start-up that builds and tests optical-networking gear for other companies. "In April, we had 30 people, and we have 120 now. I wouldn't be surprised to see us have 150 to 160 employees by the end of the year." Since the optical networks already in the marketplace rely upon earlier technologies - and will have to be continually updated even as new networks are built - this industry still represents the next great growth phase of the Internet. Prior to the optical age, voice or data traffic was transmitted as electronic impulses over copper-wire networks. With an optical network, however, beams of light send traffic through fiber-optic cable. Optical networks speed up the data and widen the "pipes" so that more data can be sent at any one time. This lowers costs and makes possible all sorts of new Internet services. But optical networking is very science-intensive, and any region able to amass a community of companies involved with this technology will cement its place as a true Internet "player." Thanks to Ciena and Corvis, Maryland staked an early claim. Now, with such private start-ups such as Trellis Photonics Ltd., YAFO Networks Inc. and iPhotonics, Maryland is building that critical mass any player must have. The potential payoffs are legion, and are already occurring. Scores of highly skilled jobs would be created. Lucrative stock offerings and stock-option packages would pump up surrounding community economies. New companies would sprout, thanks to the inevitable cross-pollination. And complementary companies would be drawn to Maryland. That's why blips like the Nortel-spawned sell-off spark worry: Could they short-circuit Maryland's emergence as an optical- networking center? Possibly. Such blips hammer stock prices, the "currency" public companies use to buy other companies or technologies. If prolonged, they can squelch venture capitalists' interest in out-of-favor sectors - causing needed seed money to dry up. Local executives aren't preaching gloom-and-doom: They've lived through temporary downturns before. Take YAFO Networks, which makes a device that resolves dispersion problems with fiber-optic signals that have traveled a long distance. Back in April, even as technology stocks were getting pounded, the Hanover-based YAFO still was able to raise $31 million from VCs. Instead of fretting about financial-market vagaries, YAFO founder Henry Yaffe says he's focusing on building his private company into one that's big, successful - and public. "I'm not going to spend time thinking about" stock blips, he says. "I'm going to spend time building up this company so that I can get it to the promised land." By: WILLIAM PATALON III -------------------------------------------------------------------------------- © 2000 Bell & Howell Information and Learning Company; All Rights Reserved. Only fair use as provided by the United States copyright law is permitted. 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