Life After Corvis

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.

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