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Technology Stocks : MRV Communications (MRVC) opinions? -- Ignore unavailable to you. Want to Upgrade?

To: peacelover who wrote (10183)	8/23/1998 6:27:00 PM
From: Robert G. Harrell	Read Replies (1) \| Respond to of 42804

To change the subject from name calling, here are more excerpts from the article Regis quoted which was on The Street.com. It would appear that there is room for many players in the DWDM market. Wall Street decided a week ago that Ciena (CIEN:Nasdaq) is more of an also-ran than a technology pioneer, but the scent of the Maryland company's troubles has been in the wind for months.... ...Today, the news got even worse as a giant in the industry said it won't buy Ciena products, quite possibly scuppering the deal that was to save Ciena. But in reality, Ciena's tight grip on its market had loosened gradually over the past year. Most of the signs were subtle, such as small phone carriers choosing products made by Ciena's competitors... Ciena mentioned no competitive threat, and words of caution from a few brave analysts were lost in the chorus of cheers for a company that in six years had forged a powerful new niche in networking. Ciena had chalked up $500 million in annual revenues and made investors rich along the way. What the subtle signs really pointed to was that competitors had multiplied in dense wavelength division multiplexing or DWDM, a technology that telephone companies use to pack extra channels of traffic into their optical-fiber networks. While telephone carriers often use two suppliers for one product, their selection of alternatives to Ciena has been far more jarring than investors expected. Interviews with customers suggest that Ciena lost some contracts because its competitors were able to sell a wider array of technology. So Ciena was forced to slash prices to fight back, something it disclosed last week... Ciena's warning last week "shouldn't be surprising to everyone," says Kevin Kalkhoven, chief executive of Uniphase (UNPH:Nasdaq), a supplier to Ciena and other DWDM companies. Kalkhoven says numerous vendors, including Pirelli and Alcatel (ALA:NYSE ADR), drove home the strength of their own products at an Atlanta trade show this spring... As a specialty supplier, Ciena was restricted partly by its lack of complementary network products. In February 1997, the carrier Frontier bought 16-channel units from NEC rather than Ciena because NEC also had products based on a standard called synchronous optical network, or Sonet. Ciena doesn't sell Sonet gear, although Tellabs does. "We decided to go with one vendor who had both systems," says a Frontier spokeswoman. Frontier will test larger DWDM products from about six suppliers, likely including Ciena, later this year... One thing that happened is that DWDM technology aged faster than many expected. Kalkhoven at Uniphase says DWDM suppliers are leapfrogging to the next generation of products much as the PC business shifted rapidly from the 386 to more powerful microprocessors. One generation of technology might pass in 18 months, Kalkhoven says, quickly changing the market's winners and losers. All of this led Ciena to make steep price concessions to at least one large, unnamed customer last quarter, which raises questions about the premium value of DWDM. Many investors were surprised at the quick onset of price competition. And it's always tough to push prices back up, especially in the technology field. ...In January, Tim Savageaux, then at BancAmerica Robertson Stephens, opened coverage of Ciena with a meager long-term attractive rating. Robbie Stephens was not a Ciena underwriter. "Our view had always been that there are at least a half-dozen big, angry suppliers," Savageaux says. So Ciena was running a horse race. Savageaux hasn't covered the stock officially since jumping to Volpe Brown Whelan in June. For its part, Ciena says it has kept its edge even while the field grows crowded. A company spokesman says Ciena shipped 16-channel products before the competition and is swiftly developing future generations of DWDM technology. The company believes cutting prices is a justified means of winning big contracts, and that its focus on DWDM helps large phone carriers select the very best technology rather than buy all their products from one vendor. Moreover, the spokesman adds that by selling to Tellabs the companies will broaden their offerings. One step toward making premium systems is building something called an optical switch along with DWDM products. An optical switch flashes light signals across networks without converting them back into slow electronic pulses along the way. Several companies, likely including Ciena and Tellabs, are developing such a product... It sounds like MRVC is heading in the right direction but I'm puzzled why their first product is only 4 channels when other companies are up to 80 channels. Perhaps 4 channels is all that's needed in the kind of market they are developing. More channels might be expensive overkill. Thoughts anyone? Bob