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Technology Stocks : Ciena (CIEN) -- Ignore unavailable to you. Want to Upgrade?

To: craig crawford who wrote (1872)	4/2/1998 1:12:00 PM
From: Sam Citron	Read Replies (2) \| Respond to of 12623

Craig, Ciena exploited their first-to-market advantage as far as it can go. Now that the race is on, LU's incumbent advantages are plain for all to see. The superior solution is not necessarily the most powerful. Lucent successfully demonstrated a 256-wave system over a year ago. But nobody needs that much capacity today. They simply want a cost-effective solution that is scalable to meet tomorrow's needs from a supplier they KNOW is going to be around. They are very COMFORTABLE buying telecom equipment from LU, because of their long-established relationships with this company. What you say about the disparity in P/S is largely correct. Bigger margins and smaller sales traditionally get higher P/S. However, O'Shaughnessey shows that P/S is one of the most important indicators of future performance. The point is that such abnormally high margins tend to be a fluke, inviting competition. Competition brings a reversion toward the mean. Therefore, I am always looking for sources of long-term comparative advantage. That takes competitive analysis. I might suggest that you have a look at Michael Porter's 20 year old book by this title. I think it might be useful to your investment decision-making. SC

To: craig crawford who wrote (1872)	4/2/1998 3:58:00 PM
From: Tim Bagwell	Read Replies (1) \| Respond to of 12623

<<Ciena has shown consistently that they are ahead of LU in WDM development. The did it again when they announced their scaleable to 96 channel system. >> The 96 channel system might as well be 196 because noone is buying the large scale systems. Customers do get warm fuzzies if they know that a system is scaleable to large numbers but basically its a marketing gag. The rush to see who can put more channels on a fiber is a big hero experiment that has no market for the time being. This has been largely hyped up by the press but customers for the most part are just focusing on getting their dull 16 channels on the fiber. We are now seeing the result of this hype in reduced expectations for sales in WDM.