Not all your stuff is cratering. ADAT is up 4.5% right now. The market's not as good as the indexes have been suggesting. How many stocks have been consistently up for the past three months?
Avanex [NASDAQ: AVNX] should benefit from SBC Communication's [NYSE: SBC] choice of Alcatel [NYSE: ALA] as its primary FTTP vendor, says Erik Zamkoff, senior communications analyst at IRG Research. Under a three-year agreement related to Avanex's purchase of Alcatel Optronics, Alcatel will purchase 70 percent of its optical components from Avanex. As such, IRG believes that a portion of Alcatel's SBC FTTP (fiber to the premise) contract eventually will flow to Avanex, Zamkoff told IRG clients Wednesday.
“Industry-wide, we think FTTP will be 10 percent of RBOC spending, or $2.8 billion, in 2005,” he said. “The SBC news, combined with Verizon's [NYSE: VZ] recent FTTP vendor announcement, leads us to expect more FTTP tests in 2004, followed by deployments in 2005.”
For Avanex, this could mean $79 million in FTTP revenue in 2005, according to Zamkoff. “We expect 20 percent of total FTTP spending to filter down to optical component makers, for total revenue potential of about $560 million. If Avanex's FTTP market share reaches at least 14% (driven by expected industry consolidation), the revenue impact in 2005 could be $79 million,” he said.
Zamkoff said MCI’s emergence from bankruptcy is an incremental positive for Avanex. MCI returned to the market for optical components during calendar 4Q03, and IRG suspects it bought from Avanex.
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