The Weekly Sample

Articles and News

Earnings season is over. Check out a summary of the post-earnings performance of all of the companies in the Nyquist sector, the Earnings Scorecard for Calendar Q208.

Iamba, a maker of GPON chipsets, is supposedly out shopping the company. After a capital infusion earlier this year they appear to have re-targeted the company as a supplier of GPON IP for other chip makers looking to embed those functions in their silicon. GPON silicon is a saturated market, and the IP from other companies who have exited the market (AMCC, Infineon) litters the landscape. It will be interesting to see what happens.

I discussed Fibernet Telecom (FTGX) last week as a stock that showed up in my ‘interesting trading activity’ screens. I checked around and learned… absolutely nothing. Something appears to be changing there but I don’t know what. Opinions from others are welcome, just reply to this email.

Finisar and Optium completed their merger. More details about the combined operating model of the company should be forthcoming. I’ve heard from several sources that there is some uncertainty and disorganization among the ranks.

Finally, we’re putting together a comprehensive and objective report on Fiber to the Home in Asia. Outside of Verizon, the majority of the remaining FTTH market is in Asia. The opportunity there is poorly documented and understood. We’re going to fix that.

If you make components or equipment (GPON or GE-PON) I’d like to talk to you either on or off the record. If you are interested in influencing the coverage area of the final report, just reply to this email to discuss your interests. If you know of someone who you feel should have input, you can forward a copy of this message by clicking here.

Links

Russian Police Arrest, Kill Owner of News Web Site - WSJ.com

What a nice place. Russians arrest web site owner, pile him into a jeep, put a bullet in his head, and dump him at a hospital 20 min later. You cannot negotiate with people like this.

Talking Business - The Kettle? The Pot Says He’s Black - NYTimes.com

Interesting article on Carl Icahn and the dark side of activist investing. The article makes the case that Icahn is manipulating the decisions at XO Communications for his benefit at the expense of other shareholders.

Lightwave - Next-generation PON options promise greater bandwidth

Nice summary of next-gen FTTH migration options

Bloomberg.com: SEC May Let Companies Abandon U.S. Accounting Rules

… and move to international IFRS standard. The big change for tech companies (not mentioned in the article) is they would/could capitalize R&D costs, which I feel would be a disaster.

FCC Needs to Improve Its Ability to Monitor and Determine the Extent of Competition in Dedicated Access Services

Detailed report by the US GAO examining the amount of competition in enterprise connectivity. Only 6% of buildings with T-1 demand have fiber. Only 15% of buildings with D-3 demand have fiber. Backing all of this up is a treasure trove of data (see pdf page 25)

Alcatel-Lucent Losses Tell Dresdner Bottom Is Here

Alcatel is turning the corner in the eyes of the financial community. New leadership, and the massive inertia its size brings should result in some semblance of improvement. ALU sells for .6x sales, 1/2 the comparable valuation of Ericsson.

VoIP Goes Mobile

The nightmare scenario for wireless carriers. This is the threat that forces the deployment of femptocells.

Communications: Gold bits and brown bits ― When you need QoS, two classes will do it!

Great summary of why Quality of Service (QoS) features are over rated. Marketing love it because they provide endless differentiation. But the features are rarely put into practice. Readers who are sold on the idea that complex NPU's are needed throughout the network for QoS purposes should read this.

Nyquist Sector Performance

Another quiet week, one of the last as kids go back to school and people start working again. Trading was light again, running at 60% of normal volume.

Lots of volume and activity in XO Communications, a CLEC carrier in the throes of a Carl Icahn activist encounter. I haven’t followed the situation closely but it appears confidence in XO’s financial future. The NY Times covered the Icahn encounter with XO and offered another side of the story (link above).

PMC-Sierra rose on strong volume and is attracting the fast money. It is a good company but I don’t feel its fundamentally that much better than it’s peers. Right now it appears I am out-voted by the market.

Avanex continued its post-CEO exit and post earnings free fall. The trader in me is calling the bottom at 5.5, based on what happens at comparable companies in similar situations.

Emcore, while deriving a significant portion of it’s revenue from optical, trades as a Solar stock now. If you are looking for insight on how to predict the solar market, don’t read this newsletter, buy a Ouija board.

Alcatel (Let’s not pretend it is Alcatel/Lucent OK?) volume picked up on news that a CEO replacement was imminent. I believe it is really hard to be negative on Alcatel at this point. You can buy January 2010 $7.50 calls on ALU for $1. Seems like a good deal to me so long as the bring in a CEO who isn’t afraid to clean things up.

Broadcom and Marvell got a good shellacking, going against the markets and against their peers. Marvell reported decent earnings but weak guidance and that sent the stock down. Broadcom suffered from a negative analyst report and sympathy selling as a result of Marvell.

Cavium (-7.5%) and Ciena (-6.05%) didn’t make the Losers list below but acted poorly in the past week. Ciena, which is the darling stock of the optical sector, continues to decline relative to the Nyquist Index (-0.1%). Cavium, a favorite chip stock, is doing the same.

In a bad market the so-called ‘quality’ stocks are the last to go, and it appears we are witnessing that now in CAVM, CIEN, BRCM, and MRVL. Notice the Nasdaq was off 2% last week, but the small/mid cap Russell and the Nyquist index were not. Is this because the small/mid cap tech sectors have been absolutely torched in the past 9 months (Nyquist Index –33% in last year) and now its time for the larger stocks? Time will tell.

To learn more about the Nyquist Index, including historical performance and what companies are included, please visit the dedicated page for The Nyquist Small/Mid Cap Index. It identifies the companies that make up the Nyquist Index universe and the methodology behind the calculation of this benchmarking tool.

Upcoming Events

Oct 20-21 - Lightreading Ethernet Expo – New York City. This is a nice little show worth attending for the small but concentrated vendor exhibits as well as some of the seminars. I’ll be there.