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

To: AMF who wrote (1719)	6/22/2001 12:45:04 PM
From: Ian@SI	Respond to of 3294

Thanks... For our archive... +++++++ Wit SoundView Morning Research Highlights June 22, 2001 Photonics Update K Slocum We believe it is time to rebuild positions in the optical communications sector. The widespread adoption of high speed access has not nearly run its course and the move to optical technology to support that service will reaccelerate over the course of next year. Most investors have moved to the sidelines and are assuming carriers will be able to mine capacity from deployed infrastructure with minimal incremental hardware investments. That is far from true and we expect carriers to improve their spending patterns moving through next year. That should drive improving results from the levels that will be reported for the June quarter and predicted for September. Managements that once saw no end in sight to their growth now see no end to the downturn all the while their customers report continued growth in traffic. We believe that economic concerns have exacerbated the slowdown that was initially driven by network capacity rationalization. It has precipitated an unsustainably low level of equipment investment. That should trigger a sharper rebound for revenues and profits than analyst estimates or investors expectations now anticipate. We are reiterating strong buy ratings on Ciena, Cisco Systems, Digital Lightwave and Finisar. We are raising our opinion from buy to strong buy on JDS Uniphase and Optical Communications Products. We are reiterating our buy ratings on Tellium and Corning and raising our rating on Nortel Networks from hold to buy. We expect that this group of companies could produce appreciation potential of 50 to 100% during the next 12 to 18 months. ... Nortel Networks (NT) Price: $8.45 Buy F01E: $(0.75) F02E: 0.00 K Slocum We are upgrading Nortel from Hold to Buy. Recent guidance reductions and concomitant estimate cuts by the street should set the stage for gradual improvements beyond the summer quarter. In a separate industry note today we discuss why we believe the curtailment of spending has reached its maximum point of pain. When coupled with the current sharp cuts in capacity, headcount reductions, product line rationalization and the low trading price of the shares, we believe that we have reached a level in Nortel's shares that warrants a buy rating. Even as growth returns to the markets served by the company, we expect strong challenges for management including growth crosscurrents among its product lines and overcoming customer dissatisfaction that developed over a period of strong growth. Nortel has been the leader in optical communications equipment and a general rebound in spending would certainly benefit its business even if you questioned their ability to maintain market share. From the current level of business activity, we don't believe market share position is relevant and we expect a rebound in Nortel's business that goes beyond just the optical business that was the focus of the past 2 years.