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To: craig crawford who wrote (1300)2/20/1998 6:26:00 PM
From: Sam Citron
   of 12603
 
Craig,

Like I said, Ciena has had a fine start, perhaps even a spectacular start. I don't take that away from them. I simply made a cold calculated decision many months ago to place my bet on Lucent, based largely on what I perceived to be an understated position that Lucent had in DWDM. Unlike Ciena, it was not issuing pompous press releases weekly about the tremendous benefits of DWDM, even though it had a pioneering role in the underlying technology. Ciena was sprinting for one single reason. It got to market first with a product that the world was hungry to buy. It's a great achievement. But it does not necessarily equate to sustainable competitive advantage. (Reminds me a bit of Compaq, another Ben Rosen-backed company. Compaq proved its meddle over time. It's much too early to say whether Ciena is made of the same stuff.

Your analogies to Cisco and IBM are not compelling. Remember that Cisco essentially invented networking. Then it had the skill to have a management which realized that it did not have a monopoly on good ideas. As for comparing LU to IBM in squandering a technological lead in computers and missing out on the microcomputer revolution because of fears of cannibalizing its mainframe computer line, I do not see Lucent asleep at the switch (pardon the pun).

I have no idea where Ciena will be in 5 years time. It's a probabilistic type of thing. It might, of course, do all the right things and have the right luck and everything may turn out golden and you will be very happy to have affirmed your faith in the company. On the other hand, it could lose its momentum or have trouble adapting to breakneck growth. With Lucent I don't have these concerns. It's not a homerun or a strike-out, but a succession of singles and doubles. It's the kind of stock you can put away for the grandchildren and almost forget about.

There are a lot of interesting one-trick ponies out there that are very volatile. At a certain price, they are all worth the risk. But for me, Ciena is not there yet.

But unless you are a momentum player, you might think about approaching an investment candidate the way a potential employee might think about staking his career on a particular company. I can tell you unequivocally that if I were a Ph.D. in optics or EE and had offers from both Ciena and Bell Labs, my response would be "Ciena who?" And never underestimate the importance to that purchasing manager of choosing a solution from a vendor that has been around for a century and still has a solid track record for innovation.

And in case you think your the only one feeling the heat this weekend, take pity on the poor shorts, like myself, who took the heat for the better part of the year and only now are beginning to see some signs of relief.

You can be sure that any market that is growing as fast as DWDM is going to attract a lot of competitors. Until someone can point out to me what particular competitive advantage Ciena has that is going to ensure its place in the sun, I will keep a hairy eyeball on this double-digit PSR wonder. It's not enough to merely say that it is in a fast growing market or that there's enough business out there for everybody.

Have a good weekend, Craig. As long as you stay rational and keep an open mind, you will do the right thing. Try not to panic or celebrate when everybody else is. There's bound to be a reaction.

Take care buddy,
SC

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To: nghi vu who wrote (1343)2/20/1998 6:26:00 PM
From: Helios
   of 12603
 
<<DELL AND COMPAQ, THAT is all hindsights>>

True enough. But there are some lessons there that can be learned and applied to companies like Ciena. With regards to Ciena I am completely ignorant, that's why I am asking. Have they brought in the people to help manage growth or is it primarily the original people riding the wave of their technology. What is their background prior to Ciena.

I am excited at the prospect of buying a good company on the cheap but as a firm believer that management is more important than technology, even for high tech firms, I like to look at managements resumes.

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To: Helios who wrote (1351)2/20/1998 7:25:00 PM
From: nghi vu
   of 12603
 
I am ignorant about their management too so I can't answer your question but if you listen to their conference call last night, they appear to be upbeat, sincere, and optimistic. We will find out in six months if they can adapt and overcome. I personally would buy at this level if I have cash laying around

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To: Sam Citron who wrote (1269)2/20/1998 7:51:00 PM
From: Richard H.
   of 12603
 
Sam, I'm a fan of Gilder and have no position on CIEN. Of note:

Gilder deleted VTSS from his ascendant technology list in June 1997. At that time the stock price was in high $30's. Today VTSS closed at $49.

Gilder has identified several winner$, but also a few laggards, example he recommended Netscape at $53, last I saw it was in the low $20's.

On CIEN, can anyone comment on the departure of David Huber? Where did he go?

Thanks. Rich

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To: Richard H. who wrote (1353)2/20/1998 8:10:00 PM
From: Maverick
   of 12603
 
Ciena Corp. (Nasdaq: CIEN), a provider of bandwidth enhancement technology for
fiberoptic communications networks, was slammed for $16 1/8 to $42 after announcing in
conjunction with its Q1 1998 results that a major customer, WorldCom Inc. (Nasdaq:
WCOM), will delay ordering new equipment until "the latter part of 1998." Ciena reported
Q1 EPS of $0.37, which beat both estimates and Q4 1997 results by $0.02. The results
represented a 184% increase over Q1 1997 EPS of $0.13. Ciena noted that the WorldCom
delay will result in Q2 revenue that is "sequentially flat or possibly lower" than the first
quarter, but the company was adamant that the push-out was not due to competitive
pressures from companies like Lucent (NYSE: LU). Ciena stated in its conference call
that it is still "comfortable" with 1998 revenue estimates of $600 million (due to the hope
that AT&T and others might fill the revenue shortfall), and it expects gross margins to
narrow to the 52-55% range and operating expenses to possibly rise to 32% of revenues.
Using the conservative end of these figures, Ciena may still make $120 million in
operating earnings for the year. Ciena currently trades at 30 times 1998 EPS estimates of
$1.47 on mean revenue estimates of $565 million, which compared with its present growth
rate is still by no means cheap.
From Motley Fool's Evening News

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To: Richard H. who wrote (1353)2/20/1998 8:20:00 PM
From: Tim Bagwell
   of 12603
 
David Huber is long gone from Ciena. Last I heard he was starting another company in an unrelated field.

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To: Tim Bagwell who wrote (1355)2/20/1998 8:39:00 PM
From: soozathelooza
   of 12603
 
i picked up some april 55 calls
for $1 today. they closed yesterday
at 6 1/2....just a fun little wager.


paul.

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To: Richard H. who wrote (1353)2/20/1998 9:13:00 PM
From: gdichaz
   of 12603
 
Have to smile re the Gilder picks you cite. I am a fan too. Your choices are fascinating. Just shows how selective data can be misleading. Gilder was saying the GE chips were going to be a major competitive problem for GA chips over time because GE getting competitive in functionality - and price a fraction of GA. In fact, ANAD and TNGT bombed. VTSS whose chips are used for different purposes has not - yet. Gilder is a trend spotter. He makes no attempt to time purchase or sale of individual companies but tries to see which are riding an up curve in technology. Thought GE was starting upcurve and GA faced more competition in future. Re Ciena and his removal of stock. Frankly puzzled. Try to follow LU and NT and IMO the Lucent "product" is in the lab - i.e. vaporware. Have seen nothing on Nortel "product". Yet Ciena has new product due next month and new products for short distances (for which there is no competition as far as I have been able to find out) early next year. Wonder if Gilder too distracted with finishing his book and let someone else do "homework" on Ciena for him. Seems unlikely but think that better to watch and wait and see what actual competition really is before getting too excited one way or other re technological competition. This said, deferral by WCOM is a blow - temporary like Korea - but real. So what to do, don't have a clue yet. Note: Suggest that idea of selling TLAB to buy CIEN bears some more thought. If wanted to buy CIEN don't see TLAB as a particularly good source of funds. But all this IMO. Flawed human. Disclaimers. Etc. etc. Luck to all. Chaz.

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To: gdichaz who wrote (1357)2/20/1998 9:50:00 PM
From: Richard H.
   of 12603
 
Thank you for providing the details. Sam asked in post #1269 if Gilder had deleted any other companys from his list. I was simply advising that VTSS was the only other company that I know was deleted. Everything else was my thoughts. Happy Investing.

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To: Richard H. who wrote (1358)2/20/1998 10:23:00 PM
From: Gary Korn
   of 12603
 
3/2/98 Fortune 217+ (See bold below)
1998 WL 2501004
Fortune Magazine
Copyright 1998

Monday, March 2, 1998

Issue: March 2, 1998 Vol. 137 No. 4

Smart Managing/Special On Careers

Is It Time to Bail From Big-Company Life? More executives are trading their
megacompany pay and perks for the risky world of startups. That life isn't for
everyone--but it has never been more inviting.
Eileen P. Gunn

Pacific Bell president David Dorman wasn't happy. When SBC
Communications bought his company's parent last year, he faced his
third corporate move in four years. His family had grown to love the
San Francisco Bay Area and was grumbling at him about their imminent

departure to San Antonio. So after a bit of soul- searching, he
summoned the courage to jump ship. Now he's CEO of a small Bay Area
Internet information services company called PointCast. He's earning
about 30% of his former salary, but he has a pile of stock options
that could make him a multimillionaire someday. "The business model
for phone services is proven," he says of the move. "But no one
knows where the Internet will go. I thought this would be fun."

A growing cadre of corporate defectors like Dorman are thinking
small these days, and many are finding a ready market for their
services. That shouldn't be surprising. Last year alone, reports
San Francisco research firm VentureOne, venture capitalists invested
$6 billion in about 1,100 PointCasts--young companies founded by
engineers and software gurus who know nothing about running a
business. Not long after (sometimes before) their patents are filed,
they need CEOs, financial officers, marketing experts, and other
management types. So these bootstrapped, fast-growth companies, once
cool toward pampered big-company executives, are seriously courting
corporate refugees. Dorman, for example, got at least 30 inquiries
from small companies after the SBC takeover.


For managers being wooed by the startups, some of the attractions
are obvious. The pay and perks may be relatively skimpy, but there
are compensations: the psychic value of being in on the ground floor
of a new venture, plus the possibility of a massive payoff if it pans
out. As John O'Neil, a San Francisco consultant who often advises
executives on jobs, puts it, "There are very few companies where
people feel they have security anyway, so why not try a job that
offers adventure and equity?"

Still, executive coaches regularly warn that such a leap into the
unknown is not for everyone. The financial risk is chillingly real;
stock options in a startup are typically worthless for years, and
many never pay off at all. Also, a lot of corporate managers aren't
as ready as they imagine for the uncertainties of a smaller outfit.
Experts say the corporate defectors happiest at small companies are
those who took the time to find partners they could get along with
and a company that's doing something that stirs their passions. And
it goes without saying, or should, that job jumpers have to be
entrepreneurial--committed to the idea of having a personal stake and
a hands-on role in building a company.


Jesus Leon is a classic big-company expat. Just over a year ago
he gave up a senior-executive slot at Alcatel Alsthom Group, the
global telecom giant, that came with a $200 million budget, two
assistants, six weeks of vacation, a luxury car, and a posting in
Madrid. Now he co-heads product development at Ciena, a recently
public Baltimore-area company with products that increase the
capacity of fiber-optic cables already in the ground. Leon took a
25% pay cut, now takes one week of vacation, drives his wife's
14-year-old Mercedes, and has virtually no budget or staff. He hopes
his stock options will make him rich someday, but meanwhile he revels
in the entrepreneurial challenge. "I love it," he says. "Instead of
looking after 1,200 people whose names I don't know, I get to be an
artist. I get to paint what Ciena will be."


Sound good? Well, if you're a corporate type yearning to be free,
it may be time to figure out if you've got what it takes to make the
move. In some cases, such as Leon's, a firm grasp of specific
technology issues is mandatory. More commonly what you need is a set
of general entrepreneurial skills. Jon Bayless, a general partner
with the Dallas venture capital firm Sevin Rosen, says he likes
"nuts-and-bolts people," those who know how to work within a small

budget and how to bring a new product into the marketplace. Along
those lines, the successful corporate candidate often has
"intrapreneur" experience, such as a key role at a division that's
strategically or geographically separate from the parent.

Another strong plus is a corporate background in the markets that
a startup's trying to crack. Take, for example, Myra Williams, the
new CEO of a Palo Alto startup called Molecular Applications Group.
The company sells software that can expedite certain drug research,
and Williams' former job, director of R&D information resources at
Glaxo Wellcome, made her a prime candidate. Explains Molecular
Applications Group director Gary Morgenthaler: "She had a high-level
position within the customer group we were targeting. She understood
them, knew how to approach them and how to craft a product that would
meet their needs."

As the Internet puts a high-tech edge on just about every
industry, recruiters are also beginning to see demand for people who
can adapt their low-tech job skills to electronic commerce. Bill
Feeley was a traditional investment banker, a managing director at
Bankers Trust, until the firm's merger with Alex. Brown left him

jobless. Since he no longer had a fat six-figure salary holding him
back, he figured the time had come to indulge his entrepreneurial
interests. Rather than signing on with another big organization, he
parlayed his financial savvy into a job at a much smaller firm.
These days he's director of capital markets at Wit Capital, an online
investment bank founded with the goal of making traditional initial
public offerings and private venture equity offerings available to
the masses via the Internet. Feeley still dabbles in his former
trade, advising other businesses on their options for raising money,
but he's also helping to create a new model for trading stock. "Not
a day goes by that we're not doing something that's never been done
before. It's exciting," he says with obvious satisfaction.

In today's tight labor market, skilled corporate managers
interested in taking a small-company plunge shouldn't have much
trouble putting themselves in play. Venture capitalists and
executive recruiters will almost certainly give your faxed resume a
good look. "You'd be amazed at how accessible venture people are,"
says Bayless. "Just pick up the phone, and be ready to explain what
your skill set is." Or skip the middleman, as Feeley did, and get in
touch with companies you'd like to join. Small-business people,

without layers of assistants to screen calls and mail, tend to be
accessible.

Say you lack firsthand knowledge of how small companies operate;
you just know you don't like the way big companies do. You might
consider a more gradual transition. Kathryn Gould, a former
recruiter and a general partner with Foundation Capital in Silicon
Valley, suggests targeting midsized businesses for jobs while seeking
out seats on small-company boards. You'll probably face a less
dramatic salary cut, and you can establish yourself as a company
builder before landing in a high-pressure startup situation.
"Startups are hard," Gould says. "For people who walk right out of
AT&T or IBM to a startup, there's a history of disaster."

If you're one of those lucky corporate types who are already
getting three or four calls a week from headhunters, consider
quitting your job and taking a few months to explore the
possibilities more closely. Gould sees this move as a gut check: "If
you can't deal with the insecurity of being unemployed, you probably
can't deal with the insecurity of working at a startup."


In any event, you should stare hard at the financial risks
involved. Lonnie Smith did just that before abandoning his
high-level executive job at Indiana conglomerate Hillenbrand to
become CEO of Intuitive Surgical, a Silicon Valley firm that makes a
computer-assisted minimally invasive surgical system that allows a
wider range of major "open" surgeries to be done through tiny
incisions. Smith was not about to trade his $1.2 million annual
salary for $300,000 and a hatful of options without thoroughly
exploring the market for his new company's products. "I asked
surgeons what the implications were if they could do this, and the
feedback was very good. I wouldn't have taken the job otherwise,"
Smith says.

At the very least, say executive recruiters, don't quit corporate
life without understanding your new company's culture and the
specifics of your role. Take time to get to know the founders, key
investors, and other executives. Ask yourself if these are people
you want to trust with your career and your fortune. Stephen Mader,
a Boston recruiter with Christian & Timbers, advises thinking of each
small company as a hot tub: "After being in it for a half hour at
120[degrees], will the water feel fine or will you want to get out?"
If you think you'll want to get out, don't get in. After all, these
days if you pass on one offer, there are likely to be plenty more.
Quote: BOOTSTRAPPED, FAST-GROWTH STARTUPS ARE SERIOUSLY
COURTING CORPORATE REFUGEES. "INSTEAD OF LOOKING AFTER 1,200 PEOPLE
WHOSE NAMES I DON'T KNOW, I GET TO BE AN ARTIST."


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