Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Katherine Derbyshire who wrote (47804)	6/9/2001 1:26:08 PM
From: John Trader	Read Replies (1) \| Respond to of 70976

OT-Telecom: Katherine, Thanks for your post. I am sure that others here understand this much better than I do, but here are some of the pieces of the puzzle. Internet use is growing, and the price of just a basic dial-up connection for consumers seems relatively cheap, the main cost being the computer for new internet users. PC prices have been coming way down recently, so even that cost has gone down. The rest of the growth in the consumer area must be due to people using the internet more, and sending bigger files such as graphics. In the corporate world, there is the "B2B" as well as "B2C" use of the internet. Companies are saving money by linking with their suppliers and customers. Some companies like Cisco and Dell use the web to a very large degree. I am not sure what the price per bandwidth relationship is for businesses. Getting back to consumers, the rollout of DSL and cable modem high-speed web access has been very slow. Price is a factor, but I think most people are simply waiting till either is available in their neighborhood. The phone and cable companies have been moving very slow with the deployment of high-speed web access so far. I have had both cable modem (AtHome) and DSL service. At least with DSL, they seem to be getting better at installing it. Earthlink DSL sends a kit and software that allows one to get it up and running without the need for a technician to enter your home or apartment. Perhaps the bandwidth suppliers are still learning how to set their pricing and business strategy, and that is still slowing things down. Maybe what we need here is the next "killer application" to cause a great jump in demand for bandwidth. Such applications are always impossible to predict, but it seems inevitable that one will appear at some point. Someone recently suggested that a video-phone application could be it. Right now it seems that people are still paying a lot of money for their long distance calls. Per John Chambers of Cisco, voice traffic should eventually be free, because of the tiny bit of bandwidth it requires relative to the bandwidth required for data traffic. It seems the phone companies are ripping us off here, despite the decrease in rates in recent years. I think they should set prices more based on the use of bandwidth. There was an interesting article in the WSJ about 4 years ago where the founder of 3Com (his name is ~Metcalf, or something like that) was interviewed. He was extremely critical of the phone companies. He said silicon valley operates under Moore's Law, while these telecom companies operate under "Moron's Law" - it was funny, and I think he was/is right. He basically argued that they were slowing the inevitable growth in bandwidth, often refusing to deploy new technologies like DSL because they were afraid it would cannibalize their existing T1 line business. This whole thing is very complicated. The latest complication being the debt problems of the telecom companies and the inventory buildup and capex slowdown. Slowdowns and inventory buildups have happened before in other industries. It is really a question of time, since eventually these things work themselves out. With regards to the time question, have we ever had this situation with an industry that is experiencing this kind of growth before ("data traffic doubling every 100 days" or so)? The argument that fiber optics is going to be a big growth area is a valid argument. I don't think there is going to be any other way to provide the bandwidth that will be needed for the evolving internet. I mainly come up with questions at this point, not that many answers. Somehow all the pieces of this puzzle fit together. Here are a few pieces that pertain to one particular company, Corning (GLW). Insiders have been buying shares lately, several of them in fact. The CEO stated the share price was "Nuts" at around $24/share. The share price was $113 back in September when all the pundits seemed to love the stock. Now it seems that nobody likes it at $18 and change. There have been lots of downgrades of GLW lately at these levels. The current PEG ratio for this company is much lower than for AMAT, or the S&P 500. The company has stated that it expects the growth in bandwidth to be about 100% per year for the next 15 years. Despite the telecom bomb that went off, and the "dark fiber" issue, they still have a backlog of orders for their fiber optic cable. So is it a screaming buy here or not? I don't know, but I sure don't buy the logic of the pundits - that it was a buy at 113 but not at 18. John

To: Katherine Derbyshire who wrote (47804)	6/10/2001 11:27:27 AM
From: robert b furman	Read Replies (1) \| Respond to of 70976

Hi Katherine,OT to AMAT I'm not an expert,but do try to learn as much as possible regarding the fiber optic build out evolution. I believe that the development of photons thru fiber is as dynamic a megatrend as electrons thru microprocessors in computing was/is. Lastweek the # 2 man from CSCO (heir apparent to John Chambers - but left to run his own wireless comp.)was on CNBC. He was very impressive. It was his opinion that the fiber long lines have been sufficiently built out.He also thought that the big networks have pretty much been built(thusly junipers problems - the big systems have been done). It was his position that the last mile (which is the terf of the rbocs -sbc and other baby bells) will now incorporate fiber optic technology. This build out will be painfully slow - as the rbocs don't exceed cash flow - but are the only players with the money to slowly carry out the build out. This leaves us searching for companies that build components for Metro Area networks i.e buildings or groups of buildings and downtown business centers or suburban business centers. This will be slow but it will be good business and it will be a LONG term money maker.Cisco still is leading in this area, but it is a small piece of the huge growth they've ridden for quite some time. As these many small MAN's (Metro Area Networks) come on stream - data growth will continue to grow exponentially. It is my opinion that long fiber growth is almost now a mature industry. Bandwidth is now the next efficiency driver.Just as dense wave division allowed 80 different colors of light to bounce thru a fiber cable - now band width turns on ( increases) the future capacity of the existing fiber lines. Bandwidth is the capability of turning light off and on in short and long blasts of light - very similar to electrons representing x's and o's in computing.The capability of turning the light on and off is done by modulators.Each(state of the art) laser has 80 modulators - one for each color of light being sent thru the fiber. Current state of the art modulators are working at 10 gbps and the new standard which is really expensive is 40gbps.The capability of expanding this modulator speed (bandwidth) is maxed at current physical limits.New technologies are just at the cusp of developement and will reinvent the levels of performance that cables will carry. So component makers for metro area network systems will be great business and the creators of faster modulators will win big time as well. When new more efficient modulators/lasers come out, all long term players will be forced to upgrade or their cost of communicating will hurt their margins. The need to upgrade will be continuous and the implementation of MAN's will be slow but very deliberate.The driver of this growth will be the rboc's. The ex employee from CSCO thought a recovery from the ixec's,dsl co. was 12-18 months out.I think he's on the money. The more recent growth to find will be MAN's and Wireless (that a whole new sermon).gggg My holdings that fit the above growth scenario are : SBSE - component maker KVHI - modulator creator and wireless antennae maker There are others like Lumera - modulators and of course CSCO. If you learn of others I'd love to hear about them. This is just a novice's attempt to understand a very complex industry and I could be wrong. Bob