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Technology Stocks : TLAB info? -- Ignore unavailable to you. Want to Upgrade?

To: Dave Dickerson who wrote (3630)	9/12/1998 10:00:00 AM
From: Gary Korn	Read Replies (2) \| Respond to of 7342

Dave, I'm wondering whether the following scenario could be the cause of the wide CIEN/TLAB spread: 1. Usually, arbs (including some tiny players, like me) narrow the spread by buying the acquiree and simultaneously shorting the acquiror. Positions of this nature continue to be placed until the spread narrows to a point at which the risk does not justify the potential gain. 2. In this case, the arbs -- who were fully positioned for ROUND 1 -- were very badly burned when original deal was scuttled. That announcement (which caused the spread to widen from 1/2 to over 30 points) must have caused a tremendous loss, as there was a stampede by the arbs to unwind the CIEN long and TLAB short positions. Before the deal was scuttled, news affecting one stock invariably moved the other. The two stocks were tightly bound. 3. Having been so thoroughly toasted by ROUND 1, at least some arbs, and I'd bet many, many arbs, are shunning ROUND 2 for the time being. That means they are not buying X-CIEN and simultaneously shorting .8X-TLAB (for example, I'm not shorting TLAB this time around, out of fear). The EFFECT of this lack of activity, or lack of "binding" of the two companies by arbs is that the spread stays wide. Moreover, the effect of this lack of activity is that news affecting one stock is not transmitted to the other. This may well explain why the two stocks are essentially trading independently for now, that is, they are not at all tightly bound by long/short arb bands. 4. Recall Coherent. Before the FTC approved the merger, the spread between TLAB and Coherent was enormous. There were many, many posts on this thread about the deal, posts that concluded it must not be happening given the great size of the spread. There was a lot of fear. Also, when news moved TLAB up, it often had no effect at all on Coherent. I recall thinking of doing the TLAB/Coherent arb spread myself, but declined to do so only BECAUSE THE SPREAD WAS SO BIG THAT I THOUGHT SOMETHING MUST BE WRONG. I also recall kicking myself after the fact for not doing the spread, because the huge differential quickly evaporated. I think the TLAB/Coherent spread was so large because the arbs had not put in their trading "bands," i.e., the long and short positions that naturally force two stocks towards each other in price. I just think that the same thing may very, very well be happening here. Gary Korn

To: Dave Dickerson who wrote (3630)	9/12/1998 4:41:00 PM
From: Thomas Haegin	Read Replies (1) \| Respond to of 7342

Dave, you responded to John, but you may have intended to reply to my post. Thanks very much for the info... you really said more than I expected. As you are well aware, there is another very able investor in NE... maybe I should move there, too and learn :-) Kind regards, Tom

To: Dave Dickerson who wrote (3630)	9/13/1998 5:57:00 PM
From: jhg_in_kc	Read Replies (1) \| Respond to of 7342

Dave, I have a similar collection of articles 2 feet thick on dell. I am just beginning my researdh on tlab. Your post last week very helpful. I have 2 questions: 1. Can you explain to me in laymen's languague what the products are that Tellabs produces. I finally comprehended what a router, and a switch ,etc. were in regard to Cisco's products. what are TLab's products? Where do they reside? In my home? In the street? You see what I'm driving at. Again, I'm very early on in my research. FYI you may find this site informative. whatis.com 2. Do you still have confidence in Tlab's management? If so , why? what's so great about their track record? after all they sought to acquire a company that turned out to be worth only half what they thought it was?/ And is the illness of one of the top men a big negative? Berkshire Hathaway without warren buffett would be quite different at least in how the market perceives it. all the best jhg