Optical Oracle's Bottom Feeders

Last week Light Reading offered a peek at the companies its paid research service, Optical Oracle, selected as those best positioned to take the lead in a telecom recovery (see Cisco, QLogic Top Optical Oracle Charts). This week -- ta da! -- we're giving you a look at the companies that are bringing up the rear (ewww!).

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
Company Combined Ranking
(in order of finish)
Overall Ranking
(out of 26 companies)
Ciena Corp.
(Nasdaq: CIEN)
36 22
Agere Systems
39 23
JDS Uniphase Corp.
(Nasdaq: JDSU; Toronto: JDU)
41 24
Sycamore Networks Inc.
(Nasdaq: SCMR)
45 25
Corvis Corp.
(Nasdaq: CORV)
48 26
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.

EzraTzvi3 12/4/2012 | 9:35:25 PM
re: Optical Oracle's Bottom Feeders Were there any ties, or were these bottom five all alone? I'm hearing rumors that two companies were tied for 21st. Also, for the benefit of those who do not have the whole report, how many quarters were examined as far as sequential stats were concerned? Hopefully not just the two most recent. That's hardly a measurement of chances for recovery. And for the sake of full disclosure, if, say, three companies were tied for first place in one category, did the fourth company score a "4," or a "2?" I'm hoping a "4," since they would technically be the fourth-highest ranked company, right? Finally, were the LR editors and analysts asked to rank all 25 companies in the order in which they expect possible recovery? In other words, what was the methodology behind the "qualitative" methodology?
Belzebutt 12/4/2012 | 9:35:23 PM
re: Optical Oracle's Bottom Feeders Wow, the Corvis message board will have a field day with this. I'm looking forward to reading many expletives from dave7777 and Sparxe.

I'm just glad my company isn't on any of these lists, it seems to be bad luck.
likebizy 12/4/2012 | 9:35:23 PM
re: Optical Oracle's Bottom Feeders My guess is that the writer of this article is under thirty years old. Long term for him is probably looking out to Christmas. The qoute I enjoyed the most is
""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."
Can you show me a single company in this sector that is providing a positive "return on in investment"?
CogswellCogs 12/4/2012 | 9:35:08 PM
re: Optical Oracle's Bottom Feeders Wow! Corvis is last! After all of the nice things Light Reading said about them over the years, such as... Umm... Oh! How about... Umm... And then there was...

I just find it pathetic that some folks can't get over being snubbed by a company who wouldn't reveal their trade secrets so they could be exposed to all competitors. So bitter, so petty, so expected.

layer3 12/4/2012 | 9:34:44 PM
re: Optical Oracle's Bottom Feeders When's the last time you saw an ad banner on LR from any one of the bottom 5 companies listed?

Let me suggest to you that had Ciena or Sycamore (both of which have tons of cash...)bought ad space on LR, they wouldn't have made the bottom 5 list.

I write this with Cisco banners dangling over my screen....sheesh, LR, you don't have to be so blatant about it...

lastmile 12/4/2012 | 9:34:43 PM
re: Optical Oracle's Bottom Feeders Nor do I.
Wi Fi is catching up in a big way. After all it is bandwidth that the consumer wanted isn't it?
And bandwidth at below Cable/DSL costs. Yes it will happen. Are we getting close to the end of the fraudband era? My guess is Wi Fi will get us into the next era of high speed communications and a fiber back bone will provide the required infrastructure. It will happen.
dave77777 12/4/2012 | 9:34:42 PM
re: Optical Oracle's Bottom Feeders Really? OK, then I guess you won't mind giving me yours.

The best part is that was written in a report they're charging $1,250 for. Gotta love the unintended irony.

dave77777 12/4/2012 | 9:34:40 PM
re: Optical Oracle's Bottom Feeders Expletives? Honestly, I thought you knew me better than that :)

I should note, though, your company may not be on the list because it failed the "imminent bankruptcy" criterion. I don't see how they make their debt payments without some kind of balance sheet restructuring. Hedge funds seem to be betting against them making it.

Still, this is a negative for Corvis. Im guessing they are weighting very heavily on sequential revenue growth and very lightly on debt, and that the people they got feedback from do not like Corvis as a brand, strategy, etc. Some here might call those they surveyed biased, but I am not going to impugn LR's objectivity re specific companies on the evidence I've seen so far.

Of course, one also has to better define this nebulous "be successful" judgment, both in terms of time frame and what "success" is. Do they mean be profitable in 2003? I would definitely be betting against Corv given those criteria. The fact that they are so completely dismissive of cash position leads me to believe their focus must be on the short-term.
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