8530 Corridor Rd.
Savage, MD 20763
Remember when you tried to bribe me to go to college close to home so your
phone bills wouldn't be too high? Well, we all know that that plot didn't
work, but thinking back on your scheme gave me an idea for your Mother's
One of the hottest IPO's this year was from a company that sprang up almost
over night right down the road from where I did finally go to college (hey,
at least I went). It's called CIENA Corp. (headquartered in the great metropolis
of Linthicum, Maryland) and they make this cool little thing that has the
telecommunications world abuzz. The technology that they have created has
allowed big companies like Sprint and WorldCom to increase the amount of
traffic that they can handle over their existing fiberoptic routes by as
much as 16 times what they normally could handle.
Why, you ask, is this important?
Because it means that ultimately my long distance phone calls to you are
going to be getting a lot cheaper. Who knows.. maybe I'll even call more
Is this a great Mother's Day present or what?
HERE'S WHAT WE'RE HOPING FOR: The stock has been one of the techie
superstars this year. It got as high as $44 on Feb. 26 after going public
at $23 just a few weeks earlier. It's done the roller coaster thing since
then and closed at $33 yesterday after a glowing report from Lehman Bros.
and a buy recommendation from Soundview Financial.
Analysts are looking for $0.64 EPS for the year ending in October and $0.82
in 1998... a 28% increase in earnings. The street is also expecting a significant
ramp-up in capital spending from the phone companies in the next year which
will mean more revenues for telecom equipment providers like Ciena.
HERE'S WHAT TO LOOK OUT FOR: So what's the downside? Well, their biggest
competitor is Lucent Technologies (you know... the Bell Lab geeks). While
Ciena is usually pretty smart so far they haven't been able to translate
their technology into actual customers and revenues. It's definitely a David
and Goliath story. I'm for betting on David on this one. Also, we all know
how volatile the tech stocks can be. Remember, this isn't one of Dad's utilities.
Hey! Tell Mrs. Jones that I said "hi" and that her son's long distance bills
have gone way down too ever since we... never mind. I'll save that for another
letter. Happy Mother's Day. :-)