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Technology Stocks : SDLI - JDSU transition -- Ignore unavailable to you. Want to Upgrade?

To: Judith Williams who wrote (248)	2/17/2001 1:55:02 PM
From: pat mudge	Read Replies (1) \| Respond to of 3294

Judith -- I think it's true, "Lucent has pneumonia. Nortel's caught a cold." Unfortunately for JDS, they were standing too close to the NT when it sneezed. Financial writers neglect to compute the fact JDS sold Zurich, where half the sales were to NT, reducing their exposure considerably. On top of that, JDS has a guarantee of $500M in sales spread over three years. That's $41M per quarter. The amount most likely will start out on the low side and build over the next 12 quarters, but it is a guarantee. Looking back over old news, we were given a big hint from CIEN: 1) WSJ after Ciena's Q4 earnings in Dec: interactive.wsj.com@6.cgi?mfmuse/text/autowire/data/BT-CO-20001207-004460.djml/&d2hconverter=display-d2h&NVP=&t However, Ciena is more of a pure fiber optics play than peers Nortel Networks Corp. (NT) and Lucent Technologies Inc. (LU). Both of those companies sell a lot of legacy switching equipment for voice networks. "We see ourselves splitting out from the legacy (equipment) providers like Nortel and Lucent," Smith said. "We are seeing a shift in the competitive landscape." 2) Early heads-up that Europe was gaining strength: lightreading.com RHK projects the European WDM market for terrestrial optical transport will grow 192%, to $1.6 billion by year-end, climbing to $5.6 billion by 2004. This forecast is based on over 100 interviews with European service providers (including pan-European operators, incumbent PTTs, CLECs, OLOs (other licensed operators), city carriers, MSOs, and undersea cable system operators). The traffic triangle of France, Germany, and the U.K, which represents the three largest telecommunication routes between North America and the European continent, will be a strong driver of this growth. These are Alcatel's and Siemens's markets. ALA is traded on the NYSE and Siemens will be by mid to late March. 3) Morgan Stanley report got part of their story right, and part wrong: Message 14653393 Specifically, Morgan Stanley picks core optical vendors, like Alcatel SA (NYSE: ALA: Paris: CGEP:PA), Ciena Corp. (Nasdaq: CIEN), Corvis Corp. (Nasdaq: CORV), Lucent Technologies Inc. (NYSE: LU), Marconi Communications PLC (London: MNI), Nortel Networks Corp. (NYSE/Toronto: NT), and Sycamore Networks Inc. (Nasdaq: SCMR). But it cautions investors to examine players in the metro access market more carefully. [The caution should have been directed toward the legacy players, not optical metro.] Why so positive on optical? There are several reasons. Despite the hype surrounding failing competitive local exchange carriers (CLEC), these carriers only account for a small portion of spending on optical equipment, says the report. Interexchange carriers (IXC) like AT&T Corp. (NYSE: T) and WorldCom Inc. (Nasdaq: WCOM) account for most of the spending. In 1999, IXCs accounted for 89 percent of spending on dense wave division multiplexing (DWDM), according to research recently published by Ryan Hankin Kent Inc. (RHK). . . . Because of cheaper deployment costs and service capabilities, optical equipment generally pays for itself in a relatively short amount of time. For example, Morgan Stanley estimates that ultra long haul gear costs anywhere from $30 to $45 million compared to the $200 to $220 million it costs for Sonet transport gear. [Explains Ciena's success.] Some metro equipment can pay for itself in as little as three months, according to the report. As stock prices of certain carriers continue to fall, it stands to reason that some spending will have to be cut. That makes sense, but Morgan Stanley predicts that carriers will reallocate money and spend more on optical equipment. Since NT said its optical metro will continue to grow in the 40-50% range, and since JDS already moderated guidance, what's the prognosis for the next couple weeks/months? Will anyone be brave enough to say JDS has been unfairly tarred with a SONET brush? 4) Q4's conference call provides hints that metro was picking up and that Asia was coming on strong: Message 15240725 Q: 980 is long haul --- it would be a comfort if that part were only 30-50%, then other products would fill in. A: Micro amplifier is not for long haul, but for switching in metro and add/drop markets. It’s a new market and we’re getting a lot of design wins. Undersea continues to show healthy signs. Really really pleased with high-speed circuits group --- sales will be significant --- also into WAN and enterprise/metro markets. Also PIRI has success in Metro market. We have a dozen or so players there. Also that they weren't exposed to the same issues as GLW: Q: Corning guided down, and mentioned capital spending from telecoms. What about SDL? A: We do not sell to that level of customer. We sell at high level, leading edge, where new deployments occur. We tend not to see some of those issues. 50% sequential growth from some who weren’t top 5. [Most likely CIEN in that group.] All of this is just Saturday morning musings. The bigger issues are the Fed and Consumer Confidence. What began as a hiccup may soon require a Heimlich Maneuver. Pat