Optical/IP Networks

Earnings Reports Drive LR Index up 4.7%

The Light Reading Index soared today on better than expected earnings reports from Juniper Networks Inc. (Nasdaq: JNPR) and Applied Micro Circuits Corp. (AMCC) (Nasdaq: AMCC). The Index closed up 34.73 (4.77%) to 762.79.

Juniper surpassed earnings estimates by 6 cents, earning 24 cents per share (see Juniper Crushes Estimates in Q4). The company reported Q4 2000 revenues of 295.4 million, up 47 percent from the third quarter. Pro forma net income was 84.6 million, a 40 percent increase over the 60.3 million in the third quarter. Juniper finished the day up 8.53 (6.67%) to 136.53.

Communications chip manufacturer AMCC also announced stellar earnings. The company reported revenues of 143.3 million, an increase of 218 percent from 45.8 million for the same period last year. Pro forma net income was 48.1 million or 16 cents per share, an increase of 297 percent from 12.1 million for the same period last year.

This quarter was positive for AMCC on many fronts. The company completed its merger with MMC, an IP routing chip manufacturer (see Semiconductor Merger Mania). It also announced its new Hudson chip line, a 10-Gbit/s device that supports both the evolving G.709 digital framing standard and Sonet/SDH (see AMCC Intros 10-Gig 'Digital Wrapper'). Additionally, the company was added to the S&P 500 index on December 20.

According to a report from Thomas Weisel Partners, demand for AMCC's optical products has been increasing steadily, particularly in the high-speed (OC48 and OC192) categories, which are higher-margin chips. In addition, there has been a rebound in demand from Nortel Networks Corp. (NYSE/Toronto: NT), its largest customer, accounting for 18 percent of its sales. According to Salomon Smith Barney, AMCC has also expanded its customer base and now has over 21 customers accounting for over $1 million in sales; these include ONI Systems Inc. (Nasdaq: ONIS) and Cyras Systems Inc. AMCC closed up 9.44 (13.41%) to 79.81.

All of this news served to allay fears about a general slowdown in demand for networking products.

More earnings releases are due out after market close today, including Extreme Networks Inc. (Nasdaq: EXTR), Redback Networks Inc. (Nasdaq: RBAK), and Xilinx Inc. (Nasdaq: XLNX).

The big winners today were Avanex Corp. (Nasdaq: AVNX), up 9.31 (17.09%) to 63.81; MRV Communications Inc. (Nasdaq: MRVC), up 2.44 (16.32%) to 17.38; New Focus Inc. (Nasdaq: NUFO), up 6.63 (17.49%) to 44.50; and ONI Systems up 4.97 (15.01%) to 38.06.

-- Matt Malina, research associate, Light Reading http://www.lightreading.com

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