The bottom five companies on the list of turnaround candidates, as ranked on the basis of both financial position and qualitative factors, include Agere Systems (NYSE: AGR), Ciena Corp. (Nasdaq: CIEN), Corvis Corp. (Nasdaq: CORV), JDS Uniphase Corp. (Nasdaq: JDSU; Toronto: JDU), and Sycamore Networks Inc. (Nasdaq: SCMR).
What about the real stinkers, you ask? Networking companies in the worst financial shape didn't even make it on the list, because decimated stock prices have given them a market capitalization of less than $200 million. Such companies include Tellium Inc. (Nasdaq: TELM) and Redback Networks Inc. (Nasdaq: RBAK).
Major European and Asian companies such as Alcatel SA (NYSE: ALA; Paris: CGEP:PA) and Siemens AG (NYSE: SI; Frankfurt: SIE) were also excluded from the ranking because, well, they're just harder to figure out.
Some head-scratchers in the list include Sycamore and Corvis, which both have sizable cash reserves and, on the surface, don't seem to be making cuts nearly as deeply as Lucent or Nortel. However, while deep pockets do ensure survival, cash alone won't fix a stagnant market.
"Having a lot of cash doesn't mean much," says Chris Bulkey, the Optical Oracle analyst who wrote the report. Both Sycamore and Corvis are losing money, and neither is selling a lot of products.
"While their cash buys them some time, it doesn't do much for providing a return on investment."
Table 1: Least Likely to Succeed
(in order of finish)
(out of 26 companies)
|JDS Uniphase Corp.
(Nasdaq: JDSU; Toronto: JDU)
|Sycamore Networks Inc.
|Source: Optical Oracle|
Note: The final ranking considered both quantitative and qualitative factors, with equal weight assigned to each category. The lower the combined score, the more favorable the final ranking.
The Oracle's rankings first considered financial metrics such as sequential revenue growth, margins, inventory, and debt. Component and equipment vendors had to have a market capitalization of at least $200 million, with no imminent possibility of bankruptcy, to be considered for the list. No service providers were ranked.
The financial rankings were then combined with a survey of eight editors and analysts from the Light Reading family of publications, including Light Reading, Byte and Switch, and Unstrung. Participants were told to rate the companies with an "X-Factor" that takes management team reputation, product strategy, brand, and other intangibles into consideration.
— The Editors, Light Reading
www.lightreading.com The Optical Oracle report, "Top Recovery Candidates," is available to annual subscribers, who receive 12 months of access for $1,250. A single-user license for one copy of the report can be purchased for $400. For more information about the report or to subscribe, go to: www.opticaloracle.com.
Editor's Note: Light Reading is not affiliated with Oracle Corporation.