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

To: signist who wrote (10685)	9/4/1998 1:05:00 PM
From: Andy H	Read Replies (2) \| Respond to of 42804

John, I know where you are coming from with the MRVC debacle. I have been there, too (not on MRVC, however). You should be concerned that this is only the first of many earnings cuts. Missing a product cycle in this ever consolidating industry can mean death. I disagree with those who keep touting MRVC's "leading edge" technology. If it was truly leading edge, MRVC sales and earnings would have grown like ASND in the early days, gross margins would not be chronically low and it would have been likely acquired at a price no one could refuse. MRVC appears to be merely selling a commodity product at low prices to small business-not to large corporate America and telcoms service providers. It has admitted to pricing pressure in its latest release. Do not count on new products to bail out MRVC with higher sales and margins. For two years, higher margin products have been around the corner, yet margins did not increase appreciably to industry averages. New products will have to work to maintain current sales and margins. Presumably MRVC has continually come out with new products over the last two years and yet gross margins haven't budged and never even reached 50%. CSCO may not have the best technology, but as an investor, all you have to do is look at the margins and know that mgt is executing well, which is the bottom line. LU and MRVC have been acquiring companies left and right to help address the markets served by MRVC. MRVC did not achieve the critical mass in time that was necessary to be able to serve (and market to) the BIG customers in its markets. Name one company the size of MRVC that has not been crushed by CSCO. Even much larger companies like COMS, BAY (WFLT-SNPX), CS all have hit a brick wall and fallen to CSCO and/or LU. I believe the preceding are the reasons why the Street has been selling MRVC over the past year and never given it a high PE. Maybe some version of WDM can save the day for MRVC. I am not qualified to evaluate the technology, market size, or MRVC's positioning there. However, in light of the above, I would not bet on it. On a technical basis anyway, this stock is going nowhere for months on end-good for scalping quarter to half points only. Institutions don't buy $5 stocks. Never bet much on a cratered $5 small tech stock. I suffered through a similar situation with Radius (RDUS) in 1992 and learned my lesson. It is very tough to find small tech companies that stumble from failing to keep up or compete with larger competitors to $5 per share that ever rebound above $10. Maybe MRVC is the exception but the odds are long.