Market Continues Its Tumble
Is the optical party over? Not according to Wall Street experts, who continue to predict relief for the optical sector, despite the fact that stock prices of component and equipment vendors extended their losses in trading on Monday.
On Monday, several systems vendors, including Ciena Corp. (Nasdaq: CIEN), Cisco Systems Inc. (Nasdaq: CSCO), and Juniper Networks Inc. (Nasdaq: JNPR), continued to take a beating.
Cisco's stock dropped 4 percent, to close at 61.31; Ciena lost 15.63 (7.83 percent) to close at 184; and Juniper lost 14.56 points, closing at 183.06. And while many optical component stocks -- embracing manufacturers of chips, subsystems, lasers, and other optical components -- regained some of Friday's losses early in the day, by day's end they too were feeling the undertow.
Particularly hard hit were Broadcom Corp. (Nasdaq: BRCM), which closed at 224.13, down 2.40 percent; JDS Uniphase Inc. (Nasdaq: JDSU, closing at 109.75, down almost 4 percent; PMC Sierra (Nasdaq: PMCS), closing at 208.50, down 2.97 percent; and Vitesse Semiconductor Corp. (Nasdaq: VTSS), closing at 80.56, down 5.84 percent.
The optical bulls, however, continued to defend the sector, describing the growing stock market fear as general rather than specific to the optical community.
"I believe this was a temporary setback only," says Robert M. Montague, analyst at Morgan Keegan & Company Inc.. "Nasdaq went down hard over the past week or so. It's not specific to components."
"People are realizing that demand for bandwidth isn't dwindling," said Alan Bezoza, research analyst with CIBC World Markets. "And while there's cause for concern, the sky's not falling."
"We're not concerned," said Mark Langley, a senior research analyst with Epoch Partners. "People have been talking about a bandwidth glut for two years now and it hasn't materialized. A lot of this is seasonal jitteriness. People get back from vacation in August and start getting nervous. The same thing happened last year."
One possible indication that the market weakness has little to do with the optical market is the serious dip in the chip sector. The chip losses originally were attributed in large part to several analysts downgrading the stocks of Applied Micro Circuits Corp. (Nasdaq: AMCC) and Intel Corp. (Nasdaq: INTC) after the U.S. Labor Day weekend, and these downgrades were associated with the PC industry, not the networking industry. (PaineWebber Inc. changed its AMCC rating from Buy to Attractive; U.S. Bancorp Piper Jaffray changed its Intel rating from Strong Buy to Buy.) At closing, AMCC's stock price was 182.75, down 1.65 percent; and Intel closed at 64.69, down 1.05 percent.
-- Mary Jander, senior editor, Light Reading http://www.lightreading.com