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Market Roars Forward

Light Reading
News Analysis
Light Reading
1/23/2001

Positive earnings news helped boost the Light Reading Index up 24.88 (3.13%) to 818.67.

Leading the charge were strong postings by chipmaker Vitesse Semiconductor Corp. (Nasdaq: VTSS) and system vendor Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA). After market close yesterday, Vitesse announced sales of 165.1 million, up 85 percent from 89.3 million last year and slightly ahead of estimates. Earnings were 47.6 million or 25 cents per share, up 133 percent from 20.4 million in the same period a year ago.

In a report issued today, Kaufman Brothers analyst Alvin Kressler said OC48 and OC192 chips fueled Vitesse's growth; sales in both categories grew 20 percent and accounted for more than half of total revenues. Vitesse closed up 8.63 (12.83%) to 75.88.

This morning Tellabs reported earnings in line with Wall Street estimates (see Tellabs Shares Perk Up). Fourth quarter revenues totaled $1.02 billion, up 42 percent from $716 million reported during the same quarter in 1999. Net income was $232 million, up 41 percent from $165 million reported in the fourth quarter of last year. This translates to 56 cents per share, up from 39 cents a year ago. Tellabs closed up 5.38 (10.05%) to 58.88.

Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7), Corvis Corp. (Nasdaq: CORV), and ONI Systems Inc. (Nasdaq: ONIS) were all up almost 20 percent, even though their lockup period ends this week, increasing the number of available shares for sale (see Eyes on Corvis Lockup Expiration). One explanation is that investors were aware of the lockup expiring and have already accounted for it. Analyst Seth Spalding at Epoch Partners says, while he is surprised by the rise, “Many people short a stock before a lockup expires, in anticipation of the price dropping.”

In addition, ONI was upgraded to a Buy by Thomas Weisel Partners. Thomas Weisel believes that ONI’s target market, metro, is expected to “experience triple digit growth in 2001 an beyond.” Also, analyst Hasan Imam expects an increase in capex spending in anticipation of a further rate cut by the Fed. ONI closed the day up 8.94 (22.31%) to 49.00.

After the market closed, Avanex Corp. (Nasdaq: AVNX) reported revenues of 47.9 million for its second fiscal quarter ending December 31, 2000, an increase of 13.1 million over the company’s revenues of 34.8 million for the first quarter of fiscal 2001. Pro forma net income for the quarter was 4.1 million, or 0.06 per share excluding special charges. This compared with a pro forma net income of 2.3 million in the first quarter ending September 30, 2000.

In after-hours trading on Island ECN, Avanex shares were trading down nearly 7, at 72. Investors may have been exercising caution in reaction to the fact that Avanex executives did not alter their guidance numbers for future quarters. Executives said they expect 52 million in revenues for the next quarter and 195 million for fiscal 2001. The company is projecting EPS of 25 to 27 cents in fiscal 2001.

-- Matt Malina, research associate, Light Reading http://www.lightreading.com

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