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Optical/IP

Portfolios on Fire

An active week in the networking space contributed to a mind-boggling rebound in optical equipment and component stocks, capped off by some furious buying on Friday. The networking sector led the rally of technology stocks in general.

Hefty gains in Redback Networks Inc. http://www.redback.com (Nasdaq: RBAK), which announced its metropolitan-area optical product on Tuesday, led the charge in equipment makers. And the announcement earlier in the week that Lucent Technologies Inc. http://www.lucent.com (NYSE:LU) planned to acquire Chromatis Networks http://www.chromatis.com for $4.5 billion certainly helped draw investor attention to the optical arena.

For example, as of Friday's close, Redback was up 56 percent for the week, trading at $112.56 after starting the week at $72. Juniper Networks Inc. http://www.juniper.net (Nasdaq: JNPR) ended the week at $214.50, up 13 percent on Friday and 40 percent for the week; Ciena Corp. http://www.ciena.com (Nasdaq: CIEN) closed at $138.31, up six percent on Friday and 35 percent for the week; and Sycamore Networks Inc. http://www.sycamorenet.com (Nasdaq: SCMR) checked in at an even $110, up 20 percent for the day and roughly 40 percent for the week.

The larger equipment manufacturers also rebounded from their recent slumps. Nortel Networks Inc. http://www.nortel.com was trading at $60.06, up four percent for Friday and 15 percent for the week; Lucent http://www.lucent.com (NYSE:LU) was at $63.00, ahead five percent on the day and up 12 percent for the week; and Cisco Systems Inc. http://www.cisco.com (Nasdaq: CSCO), closing at $64.38, had tacked on six percent on Friday and 10 percent for the week.

Components vendors also participated in the party. Sector leader JDS Uniphase Inc. http://www.uniphase.com (Nasdaq: JDSU) closed at $110.38, yielding a gain of 30 percent on the week; and SDL Inc. http://www.sdl.com (Nasdaq: SDLI) was at $260.38, up 30 percent for the week.

Many Wall Street analysts had positive comments on the optical market earlier in the week following both the Lucent deal and Redback's announcement (see Wall Street Watches Optics).

Such sentiment seemed to drive the market for the remainder of the week. When the money flowed back into tech, the networking companies--and those focused on optical networking in particular--was the place to be.

--R. Scott Raynovich, Executive Editor, Light Reading (http://www.lightreading.com)

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