I like your valuation, and if you add Needham's price target for Uniphase of 97, it gives JDS even more space to run.
Here's another article mentioning JDS, and one I've posted to the Com21 thread for obvious reasons:
<<<January 29, 1999
Dow Jones Newswires
TECH WEEK IN REVIEW: At Last, Signs Of Broadband Revolution
By JASON FRY and TIMOTHY HANRAHAN
Dow Jones Newswires
The Wall Street Journal Interactive Edition
NEW YORK (Dow Jones)--Paul Somerson, the columnist for "PC Computing," got off one of the best lines in recent memory a couple of months back: "Will DSL ever reach my home? Will next year's most popular baby name be Slobodan?' What's even funnier, though, is that it looks like 1999 really will be the year that DSL - or the cable modem, its rival high-speed solution - arrives for a substantial number of actual consumers.
There are more and more rollout schedules, more and more deals offering free modems, and more and more discounts on installation. There are high-profile alliances that make you sit up and take notice, and Internet acquisitions made with an eye toward a broadband world. In short, there is hope - something high-bandwidth dreamers had just about given up.
What are the reasons for the change? Some of them are external to the cable-TV companies and telephone companies that are finally bringing broadband to homes in earnest. Last spring's mania for "portal" sites got a number of media and telecommunications giants into the Internet game for real, giving them an interest in removing the access limitations hamstringing the Internet's further development. The extended boom in Internet stocks has had a similar effect, sending old-guard firms looking for a new coat of Internet paint that will bring in investors' money.
And then there's the most important external factor as well: fear. There's the fear of AT&T Corp.(T) and its landmark merger deal with cable-TV giant Tele-Communications Inc., which makes AT&T the power behind At Home Corp.'s (ATHM) throne. There's the worry that's intensified among telephone companies as cable modems have proved popular with consumers. And there's the fear that built as it became clear that the federal government, tired of begging telephone companies and cable-TV companies to pick up the pace, wasn't going to block the AT&T/TCI deal.
As ironies go, that one's truly delicious. The Baby Bells weren't born imperious, lazy and utterly uninterested in new ideas - they got that way because they were spinoffs of Ma Bell, which infected them with its Soviet West mentality. But battling its spawn to get back into the local-phone market reinvigorated AT&T and sent it looking for new weapons, of which TCI's network looked best. AT&T, which bears the blame for no small part of the nation's telecommunications pain, may now get a chunk of the credit for ushering in competition and jumpstarting high- speed access.
But there are internal factors as well. No one who doesn't work for them would say - at least not with a straight face - that cable-TV companies and telephone companies are eager to explore new markets, respond quickly and cheerfully to customers' wants, and have an appetite for taking risks. But both industries did face a tough and expensive task: upgrading billions of dollars in equipment and field-testing untried technology.
They didn't exactly move at Internet speed, but that's not entirely their fault. Telecommunications and cable-TV infrastructure costs billions and has to last for a long time: It's not throwaway stuff like last year's PC or a Web site without a tacked-on e-commerce mission. The Queen Mary may look like a jet ski compared with a Baby Bell or cable-TV company changing direction, but the smart companies in both industries are now moving the right way. And more heartening, the dumb ones may soon face the killing blow of competition they aren't prepared for.
In late 1997, Phoenix market-research firm Kinetic Strategies Inc. reported that about 4.5 million homes in North America would be able to get cable-modem service by year's end, and about 110,000 people would actually pay for it. Now, says Kinetic President Michael Harris, about 23 million homes can get cable modems, and about 550,000 customers do so.
At the end of 1997, DSL was only available to customers in scattered trials; now, it has about 40,000 paying customers. Obviously, it's still far behind cable modems - but Harris says he thinks 1999 will be the year in which we'll see "a real DSL response from phone companies." Behind closed doors, phone companies have long been somewhat ambivalent about DSL.
One worry is that business customers might trade in their high-speed services, such as the pricy T-1 lines now ubiquitous in most office buildings, for DSL. Cable-TV companies didn't face such cannibalization worries, and so rolled out high-speed access more quickly. ('Quickly' being a relative term stretched not quite to the breaking point when used to describe bringing broadband to the home.)
Telephone companies also feared that the government would force them to resell their high-speed networks at cost to competitors, as they have to do with local service. But now that telephone companies' ambivalence is fading.
Washington tea-leaf readers think the FCC will let the Bells create a separate subsidiary for their DSL service and not have to resell their networks. The Bells are also pressed by real competition, or at least its threat. And the escalating number of dial-up users is threatening to flood their networks; DSL, Harris notes, reduces the strain on the phone companies' switches. With the arithmetic changing in phone-company boardrooms, the arithmetic for DSL users is changing, too.
Earlier this month, America Online Inc. (AOL) and Bell Atlantic Corp. (BEL) joined forces to offer AOL subscribers DSL service in Bell Atlantic's service area. AOL users will be able to get access to the Net at up to 640 kilobits per second for $39.95 a month - about $20 more than standard AOL service, true, but significantly below the $60 a month Bell Atlantic was charging for such access. And the AOL-Bell Atlantic service should be available to about four million existing AOL customers.
Other companies are moving, too. SBC Communications Inc.(SBC) said earlier this month that it was undertaking "the largest rollout" in the country for DSL, bringing the service to nearly 10 million residential and business customers.
Meanwhile, lean and hungry competitors such as Covad Communications Group Inc., Northpoint Communications Inc. and Rhythms Inc. (which just announced an investment from MCI WorldCom Inc.) are battling to grab market share in areas the Bells haven't reached.
But if DSL is reaching a "tipping point," cable modems may be, too. Home penetration remains frustratingly low - despite more rollouts, about the same percentage of potential users opt for cable-mo dem hookups as at the end of 1997 - but the signs are good for the industry. Harris notes that installations will soon get easier. Currently, most cable-modem installations require two installers, which is expensive for the cable-TV industry. But standards-based solutions are on the way in the next 12 months, and cable modems should drop into the $200s at retail - or even come bundled with PCs.
That will make installations much easier.
Most frustrated consumers don't care which method reach es them first - either will do when neither is the current choice. But while having one method available to access the Net is good, having both is better. Widespread broadband access won't just mean fewer hourglasses: It could turbocharge any number of promising infant industries. In a broadband world, Internet telephony seems a lock to go from curiosity to commonplace. Streaming media will be revolutionized, though on-demand video will remain a ways off. Home networking will likely become a bonanza, as entrepreneurs rush to offer different standards and systems. Chip and PC makers will be thrilled too, as consumers will once again need more processor speed.
In short, it'll be a revolution - one that most home users can be forgiven for assuming would never arrive. In too many places the old order still reigns, but at last, you can hear the guns.
In other tech news this week:
Hardware and Software
Intel Corp. (INTC), reacting quickly to complaints by privacy advocates, modified its plans for deploying chip technology that could identify computer users on the Internet. The company last week announced that it would build identification numbers into new Pentium III microprocessor chips that it will begin shipping by the end of this quarter.
A federal appeals court Friday agreed to make public the full three days of videotaped interviews of Microsoft Corp. (MSFT) Chairman Bill Gates being questioned by government lawyers in the company's antitrust case. During more than 13 weeks in court, U.S. lawyers have played roughly eight hours of video.
Friday's ruling means the rest of the video - about 12 hours" worth - will be made public .
Meanwhile, Microsoft agreed to invest $500 million in British cable-TV carrier NTL Inc., a move that could accelerate NTL's rollout of a high-speed network for phone, digital cable TV and Internet services .
Uniphase Corp. agreed to merge with Canadian company JDS Fitel Inc. in a stock transaction valued at $3.24 billion, creating a powerhouse in telecommunications-equipment components. The combined company will be called JDS Uniphase.
Telefon AB L.M. Ericsson disclosed plans to slash 11,600 jobs world-wide in the next two years as part of a restructuring effort unveiled a month ago. The job cuts affect roughly 11% of the Swedish telecom-equipment maker's work force, and will generate savings of about $387.9 annually upon completion of the program, according to the company. Moving further into the networking chip market, Broadcom Corp. announced that it has agreed to buy Maverick Networks Inc. in a stock deal valued at $103.9 million .
Internet and Online
Yahoo! Inc. (YHOO), as expected, announced a $5 billion stock swap for GeoCities Inc. that accelerates a realignment of Internet players into a handful of power camps.
The Federal Communications Commission retreated from a proposal that would open the door to considerations by the agency over whether to regulate a high-speed cable-Internet service. But the commission didn't totally rule out the possibility that it could intervene in the future to force cable-television companies to open their high-speed networks to rivals that want to offer Internet services .
Microsoft Corp. said it will phase out use of Inktomi Corp.'s Internet-search technology, a blow to the start-up and a move linked to Compaq's spinoff of AltaVista. Microsoft, which had used Inktomi's technology on its MSN Web sites, said it will switch to AltaVista's search service .
Hearst Corp. said it is combining its HomeArts Web site in a new venture with Women.com, another popular women's site. Hearst and Women.com will each hold a 50% interest in the new company, to be called Women.com Networks LLC and be operated by the management of Women.com.
Genuine Music Coalition, an alliance of high-tech and recording-industry firms, introduced an initiative aimed at addressing a key issue related to the popular MP3 format for exchanging music over the Internet: how to prove a song isn't a pirated copy .
Telecommunications & Cable
AT&T Corp. will offer customers a single bill for all its telephone services in an aggressive bid to provide convenient one-stop shopping. The plan aims to eliminate the boundaries between wireless and traditional phones by charging customers 10 cents a minute for either. Customers buying the new service will be obligated to sign a one-year contract and buy their own wireless phone.
Cable operators Tele-Communications Inc. and Charter Communicati ons said they plan to acquire about 700,000 subscribers across the South from InterMedia Partners .
Earnings Alcatel SA posted an 11% rise in operating profit for last year, but the results from the once-struggling trains-to-telecommunications conglomerate disappointed analysts. Amazon.com Inc. and eBay Inc., two of the Internet's leading merchants, reported breakneck sales growth in the fourth quarter and bottom-line results that topped analysts' expectations .
America Online Inc. beat Wall Street expectations for its fiscal second quarter, reporting strong earnings and revenue growth thanks to a robust rise in holiday electronic commerce and a surge in its member base .
AT&T Corp.'s fourth-quarter earnings surged 58%, but it said efforts to connect with additional cable companies, which are vital to its local phone strategy, are lagging behind.
Compaq Computer Corp. (CPQ), wrapping up a tough year for its personal-computer business, said earnings for the fourth quarter rose 14% on the strength of robust home-PC sales and a rebound in sales of Digital Equipment minicomputers.
EMC Corp. continued its rapid climb in the corporate-data storage market, reporting fourth-quarter earnings surged 54% on a 36% revenue boost.
Ericsson's earnings fell 2.8% in the fourth quarter, pressured by higher costs and stiffer competition. The company also warned of lower operating profit for the first half of 1999.
Infoseek Corp., the online portal partner of Walt Disney (DIS) Co., posted a deep fiscal first-quarter loss on charges.
LSI Logic Corp. released fourth-quarter results that topped analysts' expectations, helped by a rise in chip sales for networking and storage gear.
Mindspring Enterprises Inc. said its fourth-quarter net income increased more than sixfold, largely due to strong sales of the company's dial-up consumer Internet service.
Nokia reported impressive sales growth and profit that met expectations for the fourth quarter. The company also moved to split its stock 2-for-1.
PeopleSoft Inc., a developer of enterprise resource planning software, posted lower-than-expected earnings for the fourth quarter, and warned that its growth has slowed. The company also disclosed that the SEC is looking at the company's acquisition charges.
Philips Electronics NV predicted that 1998 earnings from normal business operations will be "marginally" below those posted the year before, a sign that the Dutch electronics giant could be facing a tough 1999. The warning was the second in four months.
Sony Corp.'s (SNE) operating profit fell 20% in the latest quarter, dragged down by falling sales of electronics products such as cellular phones and computer displays in emerging markets and by stiffer price competition in developed countries.
STMicroelectronics NV reported a better-than-expected 3.5% decline in fourth-quarter net income following renewed demand for computers and personal electronics.
Telxon Corp. said the release of its fiscal 1999 third-quarter earnings would be d elayed pending a review of the hand-held scanner maker's books. The news came just over a month after they were hammered by the company's announcement that it would restate fiscal second-quarter earnings.
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