Three years ago, if somebody told you a networking company with no revenues and a secret product would go public and attain a $37 billion valuation within a week, you would have told them they were crazy.

That exact scenario happened last week, with the IPO of Corvis Corp. (Nasdaq: CORV). And it still seems crazy. Corvis went public at a time when valuations for optical networking companies are climbing across the board, with little rationale behind the rise other than the simple rules of supply and demand.

"I don't know how I'd ever justify it," says Deep Tankha, an analyst with 2M Invest A/S of the valuations being set in the optical network market. "It's in a hot area, so everybody is trying to get in on the deals and it pushes the price up."

Corvis, still hiding behind the cloak of secrecy known as the "quiet period" that precedes and follows an IPO, has yet to release detailed information about technology employed in its products. The company has earned a reputation for being secretive with the public and with analysts -- including locking its gear in glass cases at this spring's Supercomm trade show. And on the recent IPO road show, questions about the technology were deflected, according to several sources from the presentations.

Hype or hoax? It's definitely not a hoax, but the real question is whether Corvis technology is as "revolutionary" as the financial world seems to have assumed, or whether the company is building another application of what's already out there. The company has refused to say whether it's employing technologies such as ink-jet bubbles (see Alcatel Backs the Bubble), micro-electro-mechanical systems (MEMS), or something entirely different in what it says is its "all-optical" switch. What's given Wall Street confidence in the company is the fact that David Huber, a PhD who is the founder and CEO, has made them all rich before, with Ciena Corp. (Nasdaq: CIEN). But sooner or later, Corvis will have to start talking to the public -- especially when the quarterly conference calls begin.

The numbers are mind-boggling. With 330 million shares of stock outstanding, Corvis adds or subtracts $330 million in market capitalization with every $1 tick on the Nasdaq. As of mid-Monday, Corvis's market capitalization stood at about $37 billion. That's a bigger valuation than Ciena, which launched one of the first optical IPOs in 1997 and is now approaching $1 billion in annual revenue. Huber left the company to start Corvis.

But let's have some real fun: Corvis, the company with a secret product and not a penny of reported revenue, has a valuation equal to that of General Motors (NYSE:GM), one of the largest automakers in the world.

So does that mean Corvis must now fill up the world's highways with optical networking products to maintain its stock price? Well, yes. To live up to the expectations that have been set, Corvis must outgun established optical players such as Nortel Networks Inc. (NYSE, TSE: NT), Lucent Technologies Inc. (NYSE: LU), Ciena, and Cisco Systems Inc. (Nasdaq: CSCO), as well as startup competitors like Sycamore Networks Inc. (Nasdaq: SCMR), in wiring the fiber optic highways with its optical routing and transport products. After all: Its valuation now implies that it's the leader in the space.

Experienced financial analysts say such IPO activity is not unprecedented. Each year, another landmark IPO sets the stage for heated debate about valuation on Wall Street, only to be outdone in subsequent years.

"It seems aggressive," says Tim Savageaux, senior analyst with W.R. Hambrecht & Co., speaking of the performance of Corvis stock. "Certain markets get into stages in which the public markets don't distinguish between nuances of companies." Savageaux notes that excitement over IPOs in emerging markets is nothing new: Ciena and Sycamore preceded Corvis with their own blockbuster IPOs. Sycamore is currently trading below the levels it reached following its IPO, even though it has pleased Wall Street by surpassing the $100 million revenue mark in less than a year. Like Corvis, it had no revenues on the day it went public.

Ciena, for its part, was once the star IPO of optical networking. In 1997 Ciena came out with a valuation that seemed ludicrous to many. And the stock climbed sky-high, until the company missed a quarter in 1998, causing shares to collapse to an all-time low. Since then, Ciena has posted renewed growth, and the stock has rebounded, once again flirting with an all-time high.

"There's a lot of animal spirits that will be replaced with value analysis," says Savageaux.

And Corvis has clearly raised the bar: It must now financially outperform both Sycamore and Ciena to support the expectations that have been set. Important analytical information such as quarterly results, customer purchases, and details about the technology, have yet to emerge.

"The models used to value companies don't apply quite well [to Corvis] because there is assymetric information," says Babu Ranganathan, a general partner with Apex Venture Partners. "It's not a multiple of revenue, it's a multiple of concept. It depends on how big the concept is." Apparently, most investors seem to think the Corvis concept is the biggest in networking history.

-- R. Scott Raynovich, executive editor, Light Reading (http://www.lightreading.com)