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| http://www.gilder.com/ | Issue 204.0/June 3, 2005
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▪ The Week / Broadwing’s Bottom Line
Friday Feature / The Intersection of Value & Vision
▪ Friday Bonus / Mighty Morphing Power Processors
▪ Friday Bonus II / Historic Undervaluation
▪ Readings /
The Week / Broadwing’s Bottom Line
The following is excerpted from the June 2005 Gilder Technology Report:
Built by Corvis around the turn of the millennium, Broadwing (BWNG) remains the only national communications system that transmits its contents entirely on wings of light. That’s the poetry of it. The prosaic reality is that while our old favorite paradigm player Corvis was a clear leader in building true all-optical network technology, Corvis went into a coma in the deflationary telecom crash. Then came an amazing rescue operation when some two years ago Corvis founder-CEO David Huber turned around and bought the network in a brazen effort to demonstrate the huge technological lead of Corvis’s Raman-based systems. Over eight years, this technology has enhanced the potential cost effectiveness of optics (measured in wavelengths times bit miles per cable without optoelectronic regeneration) by 16 thousand-fold.
In a wavelength division multiplexed (WDM) network such as Broadwing’s, multiplexers take several “colors” or wavelengths of infrared light, each bearing a separate bit stream, and fuse them together on a single fiber. Demultiplexers separate them again at the other end to be sent to their destinations. In between, amplifiers boost the signal down the line; without them it dwindles and has to be recovered by electronics. Corvis’s system amplifies light with sound (that’s the Raman effect), increasing the distance between electronic regeneration in the network from 400 kilometers to 3,000 km. This enables all-optical wavelength switching, a much cheaper, far more scalable, and more reliable architecture (we have said for a decade) than a packetized IP-routed Cisco core where every packet has to be read at every node and add-drop point.
As a result, Broadwing’s Corvis-built network uses more than a thousand fewer laser line cards than competing networks built by Ciena (CIEN) or Lucent (LU), each elaborating networks on a foundation of opto-electronic (O-E-O) switches at major hubs. Retaining the E (electronics) also requires lots of additional and expensive O (optics). By completely removing distance from the equation, Broadwing hugely reduces the cost of a bit-mile and creates a network where latency is chiefly governed by the speed of light alone. For physics buffs, the global network becomes an Einstein/Minkowski light cone.
Although few of Broadwing’s customers may be physics buffs—trust me, I’m a physicist—physical effects can reach the bottom line. Now capable of lighting 320 wavelengths per fiber, with an ultimate limit of around 14 thousand wavelengths per fiber, the network uniquely supplies hundreds of thousands of direct end-to-end lightwave connections between metro nodes and business locations. At the same time, it operates with superior latency and hence superior quality of service for lower cost and greater reliability than its optoelectronics competitors. Customers should be flocking to Broadwing’s better deals and superior quality. Right?
Excerpted from the June 2005 Gilder Technology Report, by Charlie Burger with George Gilder. To read the complete report and to find out whether customers should be flocking to Broadwing, visit http://www.gildertech.com.
Also, logon to the GTR Subscriber Message Board, at http://www.gildertech.com/ today to discuss the June ’05 Report with the GTR editors.
27 – 28, 2005 | The Resort at Squaw Creek, Lake Tahoe
Friday Feature / The Intersection of Value & Vision
At the beginning of the 14-year period starting in mid-1990, Cirrus Logic (CRUS), Linear (LLTC), Maxim (MXIM), Altera (ALTR), Xilinx (XLNX), Intel (INTC), and Cypress (CY) were thought of as ready to ride the wave of Vision. However, a couple of these visions were either flawed or executed poorly.
Linear Technology and Maxim are the two most successful analog semiconductor companies today. Altera, Xilinx, and Intel, three companies that leveraged highly differentiated strategies in the digital semiconductor world, are tightly grouped in the middle. And, two companies at the bottom are Cypress and Cirrus, the former specializing in digital and the latter in analog and mixed-signal semiconductors.
Ironically, in 1990, many believed Cirrus and Cypress were the two companies from this group with the most lucrative visions and that Linear Tech and Maxim were, well, less exciting. However, those who invested in the Cirrus IPO in 1990 and failed to realize along the way that Cirrus was all Vision and no Value, lost roughly 50% of their original investment during the 14 years that followed. In contrast, during the same 14 years, those who invested in Linear Tech, reinvested their modest dividends and just let it ride, ended up with a 5,862% profit!
1. Vision without Value doesn’t pay very well.
2. Finding companies that deliver value can be more important than timing cycles.
(Excerpted from a 19-page special report from Next Inning Technology
Visit http://www.gildertech.com/subscriber.asp to
read the complete report and learn more about:
• The performance of Cirrus Logic (CRUS), Linear (LLTC), Maxim (MXIM), Altera (ALTR), Xilinx (XLNX), Intel (INTC), and Cypress (CY) during the 14-year period starting in mid-1990.
• The Eight Virtues of Semiconductor Stock Value; growth potential, fundamental strength, management, focused strategy, shareholder friendliness, differentiation, durability of differentiation, and operational elegance.
Technology Research is
edited by Paul McWilliams, a 20+ year industry veteran who was named by SmartMoney as one of the most 30
influential people in the world of investing. Next Inning’s most recent portfolio addition, SiRF, is up
nearly 50% since it was added only six weeks ago. Investments like SIRF have enabled McWilliams to drive the value
of the Next Inning portfolio up over 210% since it was started in September
- Regular commentary about a wide
variety of technologies and
- Detailed monthly updates and commentary on worldwide semiconductor sales.
- Quarterly “State of Tech” reports covering a super-set of tech companies from ten sectors.
- Special reports and investment primers, such as “The Intersection of Vision and Value”.
Subscribers to the Gilder Friday Letter can enjoy a free 30-day trial and, if they wish to continue, save $300 on a 12 month Next Inning subscription by clicking the following link: https://www.nextinning.com/subscribe/index.php?refer=gilderjune
Friday Bonus I / Mighty Morphing Power Processors
Even by the standards of the Lone Star State, the claim by two Texas researchers – Douglas C. Burger and Stephen W. Keckler – can seem a trifle grandiose. "We're reinventing the computer," asserts Keckler.
A glance at their backers, though, dispels some of the skepticism. IBM is working closely with the two scientists. And the Pentagon's Defense Advanced Research Projects Agency in 2001 handed them $11 million in development funds. Now, IBM is gearing up to manufacture the first prototype of their concept for a radically new computer-brain chip. If it delivers what Burger and Keckler promise, high-tech gurus are betting it will spawn a new family of superchips from Big Blue – chips capable of crunching a trillion calculations every second.
Such blistering speed would itself be amazing; it's roughly the oomph of a $50 million supercomputer in 1997. But more impressive, the chip can rewire itself on the fly – a feat known as reconfigurable computing.
Read the Complete Business Week Article:
Scientists Develop Next-Generation Memory Chip
Forbes/Wolfe Nanotech Report
Nanotech is Hot…But Don’t Get Burned: Nanotechnology is changing the world and creating an investing opportunity of a lifetime. We highlighted one company at $1.60 and it is now up over $17…and our Nanosphere portfolio is up over 90% since Mar. 2002. But beware of the hype! The Forbes/Wolfe Nanotech Report separates the true leaders from the overpriced.
Start your subscription today and immediately download our latest report ‘5 Biggest Profit Takers of the Nanotech Revolution’ and get the 5 stocks that every nanotech investor should be buying right now. Click Here For More Info
Friday Bonus II / Historic Undervaluation
GTR message board post by the GTR’s Bret Swanson (6/2/05): Two of our favorite economists – famous Art Laffer and the rising Mike Darda – show that the S&P 500 is undervalued by historic proportions. Laffer believes the S&P is 85 percent undervalued. Darda, using a similar but distinct model, shows that the gap between S&P stock prices and capitalized economic profits is the largest it's been since 1977. In the late 70s, stocks did not rise to meet profits because a debilitating inflation intervened. Today, with gold down from recent highs and holding steady, we face no such problem. The gap can be closed via a combination of higher interest rates and higher stock prices. We probably will get some of both, but stocks should make up most of the difference. If the Administration would denounce the “China dummies,” I think stocks would jump to catch those soaring profits.
GTR Reader’s question: Can you tell us more about the denouncement of the "China dummies"? What will that look like, and over what? Tariffs, yuan valuation, IP? I think I can spot a rise in interest rates, but maybe not an adequate and sufficient denouncement, one that will cause the markets to rise.
Administration should quit pressuring China to change it currency situation,
with bogus arguments no less, and stop accommodating the senatorial tariff
twitch. A China trade war is hovering as an unlikely but terrible
possibility, and the Administration should end the speculation. As
Art Laffer said in a debate with Prof. Ken Rogoff not long ago, "China is
our best friend."
I'm not saying stocks cannot rise without such a policy change, but it sure would help.
GTR Subscriber question: "China dummies" I assume you mean the dummies that want to tell China what to do with their currency or tariff them if they don't do the dummies bidding.
Swanson’s reply: In other historical contexts, say for the last 500 years, "China dummies" would refer to the Chinese, who destroyed a once great civilization. Today, however, with the Chinese as smart about technology and economics as anyone, the phrase refers to our own political posers and economic ignoramuses.
The Brutal Price of a Dollar
A Blueprint For Paul
Wolfowitz At The World Bank
The GTR Subscriber Message Board is where George Gilder and the GTR editorial team gather daily with investors, engineers, and money managers, to share information and debate technology and finance. Log on to http://www.gildertech.com/ today discuss the June ’05 Report.
Waiting for Grokster
Sun Moves To Buy StorageTek for $4.1 Billion
Some New Tricks For Finding
Turning To Tech For Cleaner
Analysts Bolster Google Stock
Who’s Going To Own The ‘Here’
Tripping On Power
SBC Ups Ante In Telecom War
McAfee Buys Into Wi-Fi
Molecular Transistor Developed
Magnetic Resonance Goes Nano
Wireless Quantum Crypto Network Unveiled
Samsung Starts Making 4-Gbit
Flash on 70-nm Process
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