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To: pat mudge who wrote (1489)	5/17/2001 1:17:52 PM
From: Ian@SI	Respond to of 3294

Pat, Thanks, I understand much better now... However, I'd regard TELM more as a late stage Venture Cap than as an IPO. If it holds / increases its price over the next few months, this would probably be that vote of confidence for the IPO market. If it doesn't, it may not be saying anything about the IPO market, just about its own prospects. IMO, Ian.

To: pat mudge who wrote (1489)	5/17/2001 2:03:49 PM
From: hamsandwich	Read Replies (2) \| Respond to of 3294

OT Briefing piece on TELM. 13:00 ET ****** Tellium (TELM) 15.00: Sometimes the planets are aligned... It seems appropriate that Tellium comes public on the same day that Ciena (CIEN) reported continued strong sales of its CoreDirector optical switch. For the second quarter running, Ciena noted in its conference call that the only significant competition it was seeing for CoreDirector was coming from Tellium. Corvis (CORV) and Lucent (LU) are both shipping all-optical switches, but at this point, these are two different markets. Ciena and Tellium's switches are OEO (meaning they convert optical to electrical and back to optical), which allows for higher port counts and lower granularity, meaning they can switch traffic off the fiber in smaller bandwidth increments. The all-optical switches have smaller port counts and higher granularity, which means they tend to reside closer to the core of the network than the edge. Thus far, the OEO switches have gained greater traction in the market as they have been easier to implement and allow the grooming (this goes back to the granularity issue) that telecom carriers demand. The OEO switch market is hot and Tellium is effectively one of two viable alternatives in this market, as Sycamore (SCMR) continues to experience technical troubles with its SN16000 product. As a result, Tellium has landed three customers: Dynegy (DYN), Qwest (Q), and Cable & Wireless (CWP), who have contracted for $1 bln in equipment over 5 years. That's a lot of good news, and it could be enough to give this IPO some short-term traction. Now for the reasons you should not buy and hold Tellium. Tellium's switch has more ports (512) than Ciena (256), but Ciena offers much lower granularity, which is what customers are demanding. And Ciena is working on upgrading CoreDirector to 512. Advantage: Ciena. A raft of competitors are coming soon: Brightlink (private), Nortel (NT), SCMR, and even Corvis is now designing an OEO switch to complement its all-optical switch. Over time, the OEO and all-optical markets will converge with Lucent (LU) joining the mix. As the competition heats up, Tellium will suffer due to the fact that it is currently a one-trick pony. Ciena offers an integrated transport/switching solution, and Corvis will too. Tellium does not, and carriers have favored an integrated solution. Customer concentration: only three customers, two of whom have a significant equity stake in Tellium. No guarantees: all three of its customers have the right to significantly reduce their purchases relative to that $1 bln total figure. Valuation: at the $15 offering price (stock hasn't opened for trading yet), Tellium has a $1.6 bln market cap on an annualized Q1 sales pace of $63 mln (and substantial losses). That would be acceptable if Tellium's future competitive position appeared more solid. Bottom line: Tellium's timing is right, as it currently is one of only two viable options in the hot OEO optical switch market. It should therefore be able to put up impressive numbers for at least the second half of 2001. But buy-and-hold types need to focus on the changes in the competitive landscape that are likely to weigh on Tellium beyond 2001.- Greg Jones, Briefing.com