From: owner-canslim-digest@lists.xmission.com (canslim-digest) To: canslim-digest@lists.xmission.com Subject: canslim-digest V2 #1838 Reply-To: canslim Sender: owner-canslim-digest@lists.xmission.com Errors-To: owner-canslim-digest@lists.xmission.com Precedence: bulk Content-Transfer-Encoding: quoted-printable X-No-Archive: yes canslim-digest Thursday, November 22 2001 Volume 02 : Number 1838 In this issue: Re: [CANSLIM] OT- Fiber capacity (Used to be Steel) ---------------------------------------------------------------------- Date: Thu, 22 Nov 2001 06:23:00 -0500 From: "Tom Worley" Subject: Re: [CANSLIM] OT- Fiber capacity (Used to be Steel) This is a multi-part message in MIME format. - ------=_NextPart_000_001B_01C1731E.23958860 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable My thanks, also, John, for this detailed explanation. Helps put the very = diverse group into better perspective. I picked up TTIL for part of my "not quite CANSLIM" portion of my VR = fund first on 8/6/01 and added to it 10/15/01. Overall, the position is = already up 35%. While its earnings forecast and sequential and year over = year earnings and sales were strong and growing, it lacked RS and GRS to = be very good CANSLIM at the time. The RS has now substantially improved, = making it #4 in the group on RS, and #1 in the group on EPS. However, = GRS remains low at 37. The earnings forecast of 40% growth this year, = and 25% next year, have both been recently raised. Latest qtr showed = earnings growth of 52%. I knew this company from some years ago, so felt comfortable violating a = lot of CS rules in buying it, and also averaging down, when I did so. I = am being rewarded now by fresh market recognition of its growth. I would add to all the comments on the industry that, while there is a = lot of dark fiber in the USA (much of which is likely to remain dark for = years to come), there are many developing parts of the world that still = have no fiber optics laid, and also lack good communications systems. As = they progress, I would expect fiber optic cable to be laid rather than = copper wire, thus I wouldn't count Corning as "out for the count" just = yet. Fiber optics also appears to be the material of choice for all new = undersea cabling, I presume due both capacity and transmission quality. Tom Worley stkguru@netside.net AIM: TexWorley ----- Original Message -----=20 From: Katherine Malm=20 To: canslim@lists.xmission.com=20 Sent: Thursday, November 22, 2001 12:36 AM Subject: Re: [CANSLIM] OT- Fiber capacity (Used to be Steel) Thanks, John, for this insight into the group. From a CANSLIM = perspective, understanding the focus of attention in this group will be = key in finding good growth candidates. It seems the promise of broadband = is hampered by the ability of players to get broadband into the hands of = consumers at a reasonable cost (last mile problems). Then, once there, = finding applications that make it something the consumer will want to = use in a way that will generate revenues for various businesses. As you = pointed out, video and music show the consumer will use it if they have = it. I can think of at least half a dozen additional business models that = could be successful if broadband were as commonplace as electricity, but = there is just too much in the way right now. Any additional insight you = can give from a technical perspective will help in identifying progress = in this direction. I appreciate your explanation of TTIL, as they've = been popping up in my screens in the last couple of months. I've been = researching them, reading the IR site and news stories, but I didn't = completely understand their place in the puzzle until you explained it = in this way. Thanks. =20 Katherine kmalm@earthlink.net ----- Original Message -----=20 From: John Maycock=20 To: canslim@lists.xmission.com=20 Sent: Wednesday, November 21, 2001 10:32 PM Subject: RE: [CANSLIM] OT- Fiber capacity (Used to be Steel) If I could add what I hope is some insight to this discussion. This = has nothing to do with CANSLIM except as background information.=20 =20 There are two major issues facing the transport side of the telecomm = industry, dark fiber and network capacity. Dark fiber is fiber that has = been laid in the ground but is not yet carrying traffic. Network = capacity is the transmission capacity available on "lit" fibers. As a = fiber manufacturer Corning (GLW) is at the very end of the food chain, = (70% of revenues IIRC). They had a really good run when everyone was = installing new fiber cables. When new fiber cables are ordered, the = incremental cost of installing additional strands of fiber is relatively = low, a few cents per meter per fiber, compared to cable installation = costs that can range from $2 to $10 and over per meter. Therefore to = avoid having to install another cable, most service providers installed = cables with many more fibers than needed, hence future proofing = themselves against what they perceived as future demand and threats from = the newly financed CLECs. That demand has not yet materialized and the = competition has fizzled. As the fiber in the cables have near infinite = capacity and at least a 40 year lifetime, I predict Corning will be in a = sorry state for some time to come despite their attempts to diversify.=20 =20 Corning is a special case among the fiber optic companies. The = situation is a little different for the equipment manufacturers. They = will profit from growth in network capacity. Contrary to what you might = think, demand for network capacity is still growing. The internet is = still growing at 100% per year, though voice and transaction data are = back to their regular 7%. The current big drivers for capacity are music = downloads and potentially video downloads. By mid 2002 some routes in = the US will require upgrades. However, the ILEC's are in the catbird = seat and are driving prices down as the equipment manufacturers fight = for business. The big names in the optical transport equipment business = are IMHO the ones most likely to survive, (Nortel, Lucent, Ciena, = Alcatel and Fujitsu). There are others who have good market shares in = non-North American markets who will also be around. The mantra of the = industry is cost reduction. =20 To make the battle for survival more interesting, there are = predictions that Capex from the big 11 US carriers will drop a further = 30+% YoY in 2002. Not only have we not yet seen the predicted = consolidation among the equipment manufacturers, further consolidation = is likely among the service providers. Only a few will survive. =20 Despite all this gloom, there are some interesting stocks in the = telecomm space. Network management software company TTIL was mentioned = here recently. They allow service providers to reduce their operating = costs. I do not mean to tout it, but it does stand out as having a = decent earnings record in the face of a declining market. Please IBD, = don't write it up! =20 John =20 =20 -----Original Message----- From: owner-canslim@lists.xmission.com = [mailto:owner-canslim@lists.xmission.com]On Behalf Of Katherine Malm Sent: Wednesday, November 21, 2001 9:54 AM To: canslim@lists.xmission.com Subject: Re: [CANSLIM] Steel =20 Thanks Bill, I'll look forward to taking a look. =20 Lots of dark fiber out there and too much legislation hampering the = last mile. A good combo of legislation that makes the last mile = installation more cost effective for the providers, some good = technological applications and further capacity take-out/industry = consolidation should put the dark fiber to good use. GLW is a = start...glad to see their change in strategy lately. D'you also see that = they're refocusing their attention into other product lines as well? = Very nice. =20 Again, thanks for the link, =20 Katherine ----- Original Message -----=20 From: Bill Triffet=20 To: canslim@lists.xmission.com=20 Sent: Wednesday, November 21, 2001 11:51 AM Subject: Re: [CANSLIM] Steel =20 Katherine, =20 I receive this newsletter via email but is online as well called the = Wave Report. This issue has a blurb about the telecom and fiber optics = industry. Its = http://www.wave-report.com/other-html-files/Currentwave.htm Talks about = the meltdown of the telecom service providers and the bandwidth glut. = Says Corning is closing a fiber plant for 3 months. =20 -Bill =20 ----- Original Message -----=20 From: Katherine Malm=20 To: CANSLIM List Posting=20 Sent: Wednesday, November 21, 2001 9:24 AM Subject: [CANSLIM] Steel =20 I've been watching the steel industry with great interest this last = year for signs of economic recovery. Today, NUE, X, AKS are gapping up = and breaking their downtrends. Granted, this is on news of consolidation = in the industry, but it's exactly what you'd want to see to show signs = of a bottom. Taking out excess capacity in any industry is a sign of a = change in tone. Now, if we can just see more signs that "taking out = excess capacity in telecom and fiber optics is occurring, I'd be *very* = happy. =20 Katherine - ------=_NextPart_000_001B_01C1731E.23958860 Content-Type: text/html; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable
My thanks, also, John, for this detailed = explanation. Helps=20 put the very diverse group into better perspective.
 
I picked up TTIL for part of my "not quite CANSLIM" = portion of=20 my VR fund first on 8/6/01 and added to it 10/15/01. Overall, the = position is=20 already up 35%. While its earnings forecast and sequential and year over = year=20 earnings and sales were strong and growing, it lacked RS and GRS to be = very good=20 CANSLIM at the time. The RS has now substantially improved, making it #4 = in the=20 group on RS, and #1 in the group on EPS. However, GRS remains low at = 37. =20 The earnings forecast of 40% growth this year, and 25% next year, have = both been=20 recently raised. Latest qtr showed earnings growth of 52%.
 
I knew this company from some years ago, so felt = comfortable=20 violating a lot of CS rules in buying it, and also averaging down, when = I did=20 so. I am being rewarded now by fresh market recognition of its=20 growth.
 
I would add to all the comments on the industry = that, while=20 there is a lot of dark fiber in the USA (much of which is likely to = remain dark=20 for years to come), there are many developing parts of the world that = still have=20 no fiber optics laid, and also lack good communications systems. As they = progress, I would expect fiber optic cable to be laid rather than copper = wire,=20 thus I wouldn't count Corning as "out for the count" just yet. Fiber = optics also=20 appears to be the material of choice for all new undersea cabling, I = presume due=20 both capacity and transmission quality.
 
Tom Worley
stkguru@netside.net
AIM:=20 TexWorley
----- Original Message -----
From:=20 Katherine=20 Malm
To: canslim@lists.xmission.com =
Sent: Thursday, November 22, = 2001 12:36=20 AM
Subject: Re: [CANSLIM] OT- = Fiber capacity=20 (Used to be Steel)

Thanks, John, for this insight into = the group.=20 From a CANSLIM perspective, understanding the focus of attention in = this group=20 will be key in finding good growth candidates. It seems the promise of = broadband is hampered by the ability of players to get broadband into = the=20 hands of consumers at a reasonable cost (last mile problems). Then, = once=20 there, finding applications that make it something the consumer will = want to=20 use in a way that will generate revenues for various businesses. As = you=20 pointed out, video and music show the consumer will use it if they = have it. I=20 can think of at least half a dozen additional business models that = could be=20 successful if broadband were as commonplace as electricity, but = there is=20 just too much in the way right now. Any additional insight you can = give from a=20 technical perspective will help in identifying progress in this = direction. I=20 appreciate your explanation of TTIL, as they've been popping up in my = screens=20 in the last couple of months. I've been researching them, reading the = IR site=20 and news stories, but I didn't completely understand their place in = the puzzle=20 until you explained it in this way. Thanks.
 
Katherine
kmalm@earthlink.net
----- Original Message -----
From:=20 John = Maycock
To: canslim@lists.xmission.com =
Sent: Wednesday, November 21, = 2001=20 10:32 PM
Subject: RE: [CANSLIM] OT- = Fiber=20 capacity (Used to be Steel)

If I=20 could add what I hope is some insight to this discussion. This has = nothing=20 to do with CANSLIM except as background information.=20

 

There=20 are two major issues facing the transport side of the telecomm = industry,=20 dark fiber and network capacity. Dark fiber is fiber that has been = laid in=20 the ground but is not yet carrying traffic. Network capacity is the=20 transmission capacity available on “lit” fibers. As a = fiber manufacturer=20 Corning (GLW) is at the very end of the food chain, (70% of revenues = IIRC).=20 They had a really good run when everyone was installing new fiber = cables.=20 When new fiber cables are ordered, the incremental cost of = installing=20 additional strands of fiber is relatively low, a few cents per meter = per=20 fiber, compared to cable installation costs that can range from $2 = to $10=20 and over per meter. Therefore to avoid having to install another = cable, most=20 service providers installed cables with many more fibers than = needed, hence=20 future proofing themselves against what they perceived as future = demand and=20 threats from the newly financed CLECs. That demand has not yet = materialized=20 and the competition has fizzled. As the fiber in the cables have = near=20 infinite capacity and at least a 40 year lifetime, I predict Corning = will be=20 in a sorry state for some time to come despite their attempts to = diversify.=20

 

Corning=20 is a special case among the fiber optic companies. The situation is = a little=20 different for the equipment manufacturers. They will profit from = growth in=20 network capacity. Contrary to what you might think, demand for = network=20 capacity is still growing. The internet is still growing at 100% per = year,=20 though voice and transaction data are back to their regular 7%. The = current=20 big drivers for capacity are music downloads and potentially video=20 downloads. By mid 2002 some routes in the US will require upgrades. = However,=20 the ILEC’s are in the catbird seat and are driving prices down = as the=20 equipment manufacturers fight for business. The big names in the = optical=20 transport equipment business are IMHO the ones most likely to = survive,=20 (Nortel, Lucent, Ciena, Alcatel and Fujitsu). There are others who = have good=20 market shares in non-North American markets who will also be around. = The=20 mantra of the industry is cost=20 reduction.

 

To=20 make the battle for survival more interesting, there are predictions = that=20 Capex from the big 11 US carriers will drop a further 30+% YoY in = 2002. Not=20 only have we not yet seen the predicted consolidation among the = equipment=20 manufacturers, further consolidation is likely among the service = providers.=20 Only a few will survive.

 

Despite=20 all this gloom, there are some interesting stocks in the telecomm = space.=20 Network management software company TTIL was mentioned here = recently. They=20 allow service providers to reduce their operating costs. I do not = mean to=20 tout it, but it does stand out as having a decent earnings record in = the=20 face of a declining market. Please IBD, don’t write it=20 up!

 

John

 

 

-----Original=20 Message-----
From:=20 owner-canslim@lists.xmission.com=20 [mailto:owner-canslim@lists.xmission.com]On Behalf Of Katherine = Malm
Sent: Wednesday, November 21, = 2001 9:54=20 AM
To:=20 canslim@lists.xmission.com
Subject: Re: [CANSLIM]=20 Steel

 

Thanks = Bill, I'll=20 look forward to taking a look.

 

Lots=20 of dark fiber out there and too much legislation hampering the last = mile. A=20 good combo of legislation that makes the last mile installation more = cost=20 effective for the providers, some good technological applications = and=20 further capacity take-out/industry consolidation should put the = dark=20 fiber to good use. GLW is a start...glad to see their change in = strategy=20 lately. D'you also see that they're refocusing their attention into = other=20 product lines as well? Very nice.

 

Again, = thanks for=20 the link,

 

Katherine

----- = Original=20 Message -----

From: Bill=20 Triffet

To: canslim@lists.xmission.com=20

Sent: = Wednesday,=20 November 21, 2001 11:51 AM

Subject: Re: = [CANSLIM]=20 Steel

 

Katherine,

 

I = receive this=20 newsletter via email but is online as well called the Wave Report. = This=20 issue has a blurb about the telecom and fiber optics industry. Its = http= ://www.wave-report.com/other-html-files/Currentwave.htm =20 Talks about the meltdown of the telecom service providers and the = bandwidth=20 glut. Says Corning is closing a fiber plant for 3 = months.

 

-Bill

 

----- = Original=20 Message -----

From: Katherine=20 Malm

To: CANSLIM List=20 Posting

Sent: = Wednesday,=20 November 21, 2001 9:24 AM

Subject: = [CANSLIM]=20 Steel

 

I've = been watching=20 the steel industry with great interest this last year for signs of = economic=20 recovery. Today, NUE, X, AKS are gapping up and breaking their = downtrends.=20 Granted, this is on news of consolidation in the industry, but it's = exactly=20 what you'd want to see to show signs of a bottom. Taking out excess = capacity=20 in any industry is a sign of a change in tone. Now, if we can just = see more=20 signs that "taking out excess capacity in = telecom=20 and fiber optics is occurring, I'd be *very* = happy.

 

Katherine

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