LR Index Update: Fed's Impact Minimal
The Light Reading Index dropped slightly today, depite strong earnings reports from New Focus Inc. (Nasdaq: NUFO) and Advanced Fibre Corp. (Nasdaq: AFCI). The Fed's decision to lower interest rates didn’t help, as the cut was already expected. The Index closed down 9.91 (1.32%) to 741.15.
The Federal Reserve Board cut the Fed funds rate and the discount rate each 50 basis points and indicated that further cuts were likely. The Federal funds rate stands at 5.50 percent and the discount rate at 5.00 percent. The next cut will probably come before the next meeting, scheduled in March. The Fed last cut rates in early January (see Fed Fuels Comeback Rally ).
New Focus reported an upside earnings surprise after the market closed last night (see New Focus Ups Forecast). New Focus is a component manufacturer whose largest clients are Corvis Corp. (Nasdaq: CORV), Agilent Technologies Inc. (NYSE: A), and Corning Inc. (NYSE: GLW). It makes a range of optical components, including lasers and beam combiners. New Focus closed up 10.81 (21.90%) to 60.19.
Advanced Fibre also posted impressive results on Tuesday night, beating Street estimates (see AFC Posts Record Q4 Sales). The company is a provider of access gear for telecom companies and network management software. It reported revenues of $116.1 million, up 40 percent from $82.8 million in the fourth quarter last year. Pro forma earnings were $20.2 million, or 24 cents a share, a 165 percent increase over last year’s $7.6 million, or 9 cents a share. Advanced Fibre closed up 4.25 (20.67%) to 24.81.
Alcatel SA (NYSE: ALA: Paris: CGEP:PA) announced positive earnings this morning but lowered guidance for 2001 (see Alcatel Releases Year-End Results). As a result, it was downgraded by Merrill Lynch & Co. Inc. (NYSE: MER). Alcatel said it would work down inventory levels. This could hurt JDS Uniphase Inc. (Nasdaq: JDSU; Toronto: JDU), which is a big supplier to Alcatel. Alcatel closed up 4.42 (8.21%) to 58.26.
Cisco Systems Inc. (Nasdaq: CSCO) announced new products today, including the 12000 series core router and an OC192 line card (see Cisco Ships OC192). In addition, Cisco will be announcing some new customers for its routing and optical products. Sprint Corp. (NYSE: FON) and AT&T Corp. (NYSE: T) are expected to be among the new customers, according to sources close to Cisco. Cisco closed down 0.56 (1.48%) to 37.44.
-- Matt Malina, research associate, Light Reading http://www.lightreading.com