Good article on MRV! Mark has done several articles over the last few years.
MRV: Gaining traction in tough times
Mark Savolainen Smith.
07.08.2001 15:24
Analysts could hardly believe their ears when MRV raised both
near and long term guidance in last week's 2Q conference call. In
these difficult times, only a few in the telecom business have been
confident enough to raise near term guidance. Far fewer are raising
long-term guidance as well. Doubly implausible is that the upbeat
company would be MRV, a company yet to prove its business
model.
MRV's strategy for the past several years has been to create and
manage growth opportunities in optical technology and network
infrastructure. MRV's plan was to nurture it's next-generation
business units and start-ups right through to their IPOs. The aim
was for MRV shareholders to realize value both from perceived
potential during initial growth stages and from market valuations
when the companies went public.
Just as MRV was about to launch the IPO of it's optical
components division Luminent (LMNE), the bottom fell out of the
telecom market and MRV's many IPO hopes shriveled on the
vine. The Street's perception of MRV made a 180 degree turn
overnight. The very things which seemed to make MRV so
promising heretofore were now perceived as significant handicaps.
MRV seemed to be caught in a dilemma, saddled with R&D
expenses, while unable to realize value through IPOs. Like
Alexander poised to cut the Gordian knot, MRV seems to have
found a solution: not in talk but in action; not with analysts but with
customers.
Nestled comfortably in the middle of MRV's earnings release is a
most revealing sentence supporting raised earnings expectations:
"Opportunities that have resided in the pipeline longer than normal
have started to work their way into the order system."
Such a straightforward statement speaks volumes. Translation:
MRV has enough orders from enough customers to swagger.
Reading between the lines: MRV's next generation equipment,
which has been trialing with significant customers, is going to drive
growth through 2002.
Unfortunately MRV can't reveal these customers and at present
won't name the hot products either, but this certainly didn't stop
analysts on the latest conference call from turning the Q&A into an
elaborate game of "20 questions". Nothing was disclosed by MRV
in response, but hints were dropped.
The top prospect for driving growth near term is Optical Access
(OA), an MRV business unit which is a leading designer,
manufacturer and marketer of next-generation optical wireless
solutions.
In the conference call, MRV revealed that: "Optical Access has a
significant opportunity... in Europe for 4Q.. [and] substantial Free
Space Optics purchase orders from a Chinese customer later in
the year."
These comments were music to the ears of those who have been
watching for signs of MRV progress in China. Back in 1999, there
were published reports of an MRV Nbase-Xyplex/GDT Great
Dragon Technology cooperation agreement worth $50 million.
Also at the time it was noted that there were preliminary
negotiations with Miang Jiang, son of the Chinese President, for
very large scale "cooperation" with MRV. At the time, MRV was
reluctant to comment, and since then there has been no MRV
China news published - until now.
Other MRV business units besides OA seem to be making
progress in China. Zaffire is rumored to have a very large Chinese
contract through FLAG Telecom, a European joint venture with
Verizon. For those who like proximity rumors: Zaffire's China
office is directly across the street from China Telecom. Luminent is
also rumored to be making strong headway with major Chinese
contracts.
For 2002, the MRV partner start-up to watch might be
Charlotte's Web Networks. Charlotte's Networks (CN) is a
leading developer of carrier-class terabit routing solutions for the
emerging IP infrastructure.
When asked directly whether CN had any contract wins or
revenue shipments, Gidi Kaempfer, CN's CTO, was suspiciously
careful in his response. Gidi would only say that CN was "gaining
traction". He hinted strongly that the names involved were
significant: both in Europe and the USA. He also noted that CN
was testing in live networks.
The LMNE tax-free distribution to MRV shareholders is the
subplot to watch very near-term for MRV. That's another
most-promising story for those who like their drinks straight-up
and their food spicy. |
