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To: Venkie who wrote (103)	1/19/2001 4:33:13 PM
From: carranza2	Respond to of 241

Let me know what you think. I smell an opportunity, especially with the Optical Access IPO--who knows what will happen with that but it certainly is interesting from a purely tech standpoint as well as from a value standpoint. The stock is selling for less than its components, at least according to the information noted below which was posted on the SI MRVC board: To:Renee Scherb who started this subject From: david staton Wednesday, Jan 17, 2001 8:00 AM Respond to of 29303 MRVC......... Magic 25™: MRV Communications: Bloodied But Unbowed Bargain Tell us what you think in MRVC's Board individualinvestor.com Research Analyst: Will Frankenhoff (1/17/01) We realize that incubators are out of favor. Witness the bloodying of former high-flyers CMGI (NASDAQ: CMGI - Quotes, News, Boards) and Internet Capital Group (NASDAQ: ICGE - Quotes, News, Boards) that has driven their shares down approximately 95% from their 52-week highs. And shares of fiber-optic incubator MRV Communications (NASDAQ: MRVC - Quotes, News, Boards) have suffered as well, falling around 85% from their 52-week high and are down 30% since we recommended the company in our Magic 25 2001 portfolio on Dec. 8, 2000. While we realize that general market conditions haven't been too favorable to say the least, and that the initial public offering market has cratered, we believe investors should notice the valuation discrepancy inherent in shares of MRVC. Here's a quick sum-of-all-parts valuation. First of all, there's MRVC's approximately 90% stake in fiber optic component manufacturer Luminent (NASDAQ: LMNE - Quotes, News, Boards), worth $877 million based on Luminent's market capitalization of $975 million. Secondly, there's the upcoming IPO of Optical Access, MRVC's optical networking division. The company plans to sell 5 million shares -- an 11% stake -- to the public at a price of $11 to $13 per share. That's slightly lower than the initial range of between $13 and 15 per share. Assuming that the stock is sold at $12 per share, this would value Optical Access at approximately $560 million. After the IPO, there would be 46.7 million shares outstanding. MRVC's 89% stake would therefore be worth around $498 million. It's as simple as that: MRVC's interests in these two companies alone total $1.37 billion, yet MRVC's market cap is a mere $1.09 billion. Also, the company has a number of other operating divisions in MRVC's portfolio including Nbase (Internet infrastructure switching solutions) and iTouch (next generation Internet infrastructure solutions), both of which could be spun off down the road. Furthermore, MRVC has substantial stakes in other developmental-stage companies such as a 90% stake in Zuma Networks, a developer of next generation Internet routers; a 53% stake in Charlotte's Web, which makes Terabit routers for Internet infrastructure; a 42% stake in Hyperchannel, a European B2B e-commerce company for the information technology industry; and a 20% holding in Zaffire, a next generation Internet network developer. While we don't know which of the above-mentioned companies are on management's list of firms to soon go public, we note that Zaffire recently hired a new CFO: Jeffrey Lin. Lin is a former Vulcan Ventures executive, the investment vehicle of Microsoft co-founder Paul Allen. Lin directed and managed a number of Vulcan's recent investments like Corvis (NASDAQ: CORV - Quotes, News, Boards) and Transmeta (NASDAQ: TMTA - Quotes, News, Boards) , two companies that recently went public. While it may just be coincidence, the recruitment of an experienced manager like Lin can't hurt Zaffire in terms of obtaining financing and launching an eventual IPO. In sum, MRVC is undervalued compared to its interest in just two of the many companies in its portfolio. It seems that investors are actually penalizing the company for its additional holdings. That makes no sense to us and, since the market is efficient, that error will be corrected. Updated January 16, 2000 with MRVC closing at $14.94 Recommended 12/8/00 at $21.75.