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Technology Stocks : Ciena (CIEN) -- Ignore unavailable to you. Want to Upgrade?

To: James Fulop who wrote (10344)	2/14/2001 4:54:31 PM
From: James Fulop	Read Replies (1) \| Respond to of 12623

From SSB via Yahoo...(on Sycamore, but Ciena relevant....) >>>>First, we are worried that the service providers are using the tough conditions to hold back on orders to see if they can get desperation pricing from equipment vendors. There seems to be an attitude among the service providers that: "my stocks taking it on the chin, lets spread the pain". Service providers realize the negotiating power has shifted back toward them in recent months and they appear to be holding back orders. Second, there seems to be some concern among some of Sycamore's customers about the smooth interoperability of Sycamore's products with other vendors equipment. We think this is an issue where there is a very heterogeneous network with numerous element management systems. We are looking into this issue to get a better handle on it, but we have heard this comment from several service providers. Third, we are nervous about the competitive position of Sycamore vis a vis the Ciena Core Director. It may be simply a timing issue, but CoreDirector appears to have been getting better traction in the market than the SN 16000. Sycamore desperately needs to bring down a couple of visible contracts to build the perception of momentum. We suspect the Ciena results will be substantially more robust than the Sycamore results and guidance more upbeat. This perceptual issue can impact the stock price and customers evaluations. We are lowering our price target on shares of Sycamore Networks to $35. We believe this is necessary to reflect the uncertain stock market conditions and market realities. Our new price target represents a 55% potential return. Sycamore currently trades at 98x FY 2001 earnings and 10.4 times FY 2001 revenues. Our new price target is predicated on 16x estimated 2001 revenues and 9.8x estimated 2002 revenues. On an earnings basis, our new price target implies SCMR should trade at 150x estimated FY 2001 EPS and 109x estimated FY 2002 EPS. The sharp reduction in these price targets reflects the material reduction in the upside potential in the revenue and earnings outlook for the company. While the actual forecast didn't change that much the potential for upside to the forecast is significantly cut.<< messages.yahoo.com