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Optical/IP

DISA Talk Bounces Stocks

Investors reacted in all sorts of ways as news of the GIG-BE deal winners made its way from the pages of Light Reading to all points up and down Wall Street (see GIG-BE Winners Named).

Two of the reported GIG-BE winners saw their stocks drop in late afternoon trading, while the other two enjoyed the kind of bump one usually associates with scoring a multiyear, multimillion-dollar contract win.

Cisco Systems Inc. (Nasdaq: CSCO) dropped $0.05 (0.24%) to $20.66, and Ciena Corp. (Nasdaq: CIEN) fell $0.04 (0.57%) to $6.92. Meanwhile, Juniper Networks Inc. (Nasdaq: JNPR) climbed $0.39 (2.32%) to $17.18, and Sycamore Networks Inc. (Nasdaq: SCMR) shot up $1.07 (25.91%) to $5.20.

The reactions were mixed only because the results were mixed. Our sources said Cisco won the multiservice provisioning platforms (MSPPs) chunk of the GIG-BE deal, but it lost the core routing portion to rival Juniper. They further said that Ciena won the optical transport systems (OTSs) business, but lost the optical digital crossconnects (ODXCs) piece to Sycamore.

For Sycamore, the win was a huge one, despite industry chatter that it cut prices drastically to win the business. "Potential pricing discounts concern us, and we suspect some deals may have been won with low margin," writes Merrill Lynch & Co. Inc.'s Simon Leopold, in a note to clients this morning.

"Although we can’t criticize the loss-leader strategy given that a win in GIG-BE could give a vendor bragging rights and lead to a chain reaction of commercial wins, we think aggressive pricing might have played a factor in some wins."

In fact, Sycamore may have won the deal at the last minute with an aggressive pricing concession, according to another source.

It's likely that until the fine details of the DISA contract come out (it isn't clear when), stocks will continue to bounce around. Details such as pricing and the exact revenue that each vendor could get would have further impact.

The entire GIG-BE deal was expected to draw $800 million to $900 million across all equipment and services categories. UBS Warburg LLC analyst Nikos Theodosopoulos writes in his morning note that, over the next two years, the OTS portion of GIG-BE is valued at $150 million or more; the MSPP portion and the ODXC portion are valued at between $50 million and $75 million each; and the IP routing section is valued at around $70 million.

Such numbers have a smaller impact on large companies such as Cisco, which have billions of dollars in revenue, but they could represent a major windfall to a company like Sycamore, which recently had quarterly revenues in the single-digit millions.

Sycamore, a company that raked in $38.3 million for its fiscal year 2003, could make upwards of $100 million over the next two years, barring any further changes to the government's GIG-BE plans, analysts say.

For Corvis Corp. (Nasdaq: CORV), the news wasn't so good. Investors pummeled Corvis for not having decisively won the entire OTS part of GIG-BE. Corvis shares fell $0.51 (25.76%) to $1.47 during late afternoon trading on Friday, and the stock was the most active of the day, with about 17 times its usual volume of shares changing hands.

Several sources said the news of the potential contract awards came as a major blow to Lucent Technologies Inc. (NYSE: LU), which was aggressively pursuing the business.

— Phil Harvey, Senior Editor, Light Reading

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charlesehobbs 12/5/2012 | 2:57:48 PM
re: DISA Talk Bounces Stocks CEC (CECO) is a corporation that owns for-profit postsecondary teaching institutions. CEC is a deceptive and misleading corporation that has been in turmoil in the past and from recent reports doesn't seem to have cleaned up it's act.

After much controversy CEC recently retained Gary E. McCullough as their President & CEO. Gary is going to have a mounting of issues regarding many lawsuits, active investigations by the Educational Department, Federal Government and news investigation teams to conquer before a rebound is noticeable.

CEC has existing issues with accrediting councils at many of it's campuses with countless on probation which renders the accreditation useless. The situation is only going to get worse with the mounting of past & current students speaking against CEC.


Here is the CBS 60 Minute investigation:
http://www.cbsnews.com/stories...


I have also created active groups and expose CEC and the escalating number of negative reports by past & current students and reports from the actual CEC representatives.


Facebook: http://academy.facebook.com/gr...

Myspace: http://groups.myspace.com/Thei...



Once a NYSE darling seems to be on a uncontainable downward spiral.

Charles
dave77777 12/4/2012 | 11:26:01 PM
re: DISA Talk Bounces Stocks eom
God 12/4/2012 | 11:26:00 PM
re: DISA Talk Bounces Stocks Wall Street math?
RAIN 12/4/2012 | 11:25:59 PM
re: DISA Talk Bounces Stocks Even that math is not it either:
>$150M = $(50 to 75)M + $75M = $800M to $900M over the next two years so see, now it makes sense, right?
Lichtverbindung 12/4/2012 | 11:25:58 PM
re: DISA Talk Bounces Stocks GOD and RAIN,
You two guys must be new to this board
Numbers might be off by a couple 10's.

900 = fiber (400) + equipment (400) + Saic bribe (100)
Equipment (400)= LH (150) + OEO XC (50) + MSPP (125) + Routers (75)
ssvasulu 12/4/2012 | 11:25:58 PM
re: DISA Talk Bounces Stocks The equipment portion is approximately half of total budget. The rest probably could be for other expenses like laying cables. So aim for figure between 400-450.
RAIN 12/4/2012 | 11:25:58 PM
re: DISA Talk Bounces Stocks Correction:
> $150M + $(50M to 75M) + $75M = $800M to $900M now that makes more sense, right??
vikasmin 12/4/2012 | 11:25:52 PM
re: DISA Talk Bounces Stocks Hey Phil,

It is not DISA talk or any bidders talk but
it's you & your "credible sources" talk which
has caused bounce in stock.

Take responsiblity for it and stand by it.

Do not mislead saying it is "DISA talk".

DISA would not confirm or deny anything even now.

Opticalmix 12/4/2012 | 11:25:50 PM
re: DISA Talk Bounces Stocks Phil,

What were you thinking! First an irresponsible article on which you are guessing who might win the GIG-BE contract. An article based on the lame excuse of two unnamed sources. And now you write an article on how to blame others for your lack of thinking.

What on earth did you think was going to happen when you posted your article? (Interestingly you posted very early before the market opened so I guess you knew that stocks would tumble and soar.) Did you care about the market panic and $60M in investor's losses in Corvis by 1000's of shareholders?

You are working your way right up the path or irresponsibility with Worldcom Bernie and Enron Ken - they also seamed to have no sense of responsibility.

What about your need to observe the laws of this country. Do you think that you are above the law just because you have printer's ink on your sleeve? I know that you did not sign a DISA NDA but publishing this article is just like receiving stolen property. You knew that these sources were violating a NDA and you become part of the violation of the law by printing that information. What about your responsibilities to Reg FD - do you think that you alone can thumb your nose at the SEC. Did you think to tell us what your stock ownership was or that of your two secret sources. Did you think that you may have participated in insider trading violations or could be a part of a 'pump and dump' scheme.

And what did we get from your 'noble' efforts a weak,lame article about what might be or what you think might happen. Your article was not noteworthy, contained no real facts and could have easily waited until DISA provided the real announcement. Based on your other sterling reports in the past, where I had detailed knowledge about the complete array of facts, you probably filled this article with assumptions that you have made to fill the big gaps in your knowledge.

I hope you and you organization can spell lawyer and can afford a really smart one.

Good luck in your travails. But don't look to us to help you with your excuses and alibis. You did the story and now you will do the time.
lasso 12/4/2012 | 11:25:47 PM
re: DISA Talk Bounces Stocks I'm surprised at how many people are indignant over LR's speculation over the GIGBE contract awards.

LR is a publication, and its revenue is ultimately tied to its readership. If the editors felt they had a scoop, and they believed they had credible information, then they had every right to publish their article. They identified their sources, and it is up to the reader to decide if they want to follow the presented line of speculation. The DISA business is one of the substantial netowrk buildouts since 2001, and it is material news for the industry - even if the anointed vendors were misidentified,

If a vendor other than identified by LR eventually wins a contract, that information will eventually become public, so what's the sense in lamenting of the market cap decline of some companies?

I didn't see any messages commenting that, wow, a government agency actually stuck to ts schedule for evaluating different vendors in 4 product areas. I think a commercial enterprise would be hard-pressed to accomplish this.

I don't recall anyone complaining when LR and other trade rags speculated over who won the AT&T Long Haul business. AT&T never did announce who was awarded that contract - widely reported to be Siemens - so why was no one mad that LR published business-confidential information?

Ditto for MCI Long Haul business which has been awarded without any press releases.

GIG-BE work may have been the last hope for
some companies straining for a single customer
some investors hoping to recoup their large losses
some employees hoping for employment stability

I suppose if you are somehow associated with one of these 3 groups, you'd be mad about the LR article. If you aren't, then it would have looked like some wildly speculative gossip.

Which should be expected from LR.

lasso

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