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Technology Stocks : JDS Uniphase (JDSU) -- Ignore unavailable to you. Want to Upgrade?

To: Cary Salsberg who wrote (21216)	8/13/2001 12:15:50 AM
From: semi_infinite	Read Replies (1) \| Respond to of 24042

I think Astle is trying to figure out the timing of the turn rather than the steady state growth rate and the 15% assumption is probably not a big factor in the estimate of the turn. The message I get from his piece is that the turn is imminent. I don't know if 15% is realistic or not but my guess is that it's in the lower end of a range where 50% is the long-term high end if traffic keeps doubling every year. I derived a back-of-the envelope analytical model to arrive at the 50%. The assumption is that the cost of incremental bandwith added remains constant in absolute dollars (cost per bps drops by about three quarters for each new generation of equipment). I also assume that traffic doubles (Vt=1 below) per year based upon some traffic data compiled by MSDW. To make a long story short, the short term approximatie solution to the model is: x = Vt/(Cp(1-y)) where x is the growth rate per year in optical units: Vt is the rate of growth in traffic; Cp is the photonics constant (analogous to Moore's law); y is a fudge factor and you can assume it's a decline in pricing due to competition or advances etc.... The long term approximation is x= (1+Vt)/(Cp(1-y)) Revenue growth would be x*(1-y). This is very much a simplification since I ignore second order terms like elasticity of bandwidth demand etc... Obsolescence has nothing to do with long term growth as expected. An increase in optical content in the equipment would be embedded in the y factor and under my assumptions is a second order effect at most. If 15% revenue growth is correct, then something has to give. Either traffic growth slows (Vt goes down), technology is accelerated (Cp goes up) while driving down costs (y goes up). If traffic growth doesn't slow down, then customers pay more (already happening for last mile access), Cp and y need to go up even faster. Somewhere in there is equilibrium. I'll leave it to the smart folks to figure that out. I have no idea how ML arrived at the $4B inventory overhang. JDSU breaks down revenues by major production line so you can get estimate of passive/active revenues. How important are inventory overhang and obsolescence in this scheme? I don't know. Should I care? I suppose so in trying to time the turn. I believe JDSU will be a dominant player coming out of this.