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― THE FRIDAY LETTER ―
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for friends and subscribers)
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| http://www.gilder.com/
| Issue 204.0/June 3, 2005
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HEADLINES:
▪
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
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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.
|
September
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!
Lessons Learned:
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
Research.)
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.
|
Next Inning
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
2002. - 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
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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:
http://www.businessweek.com/magazine/content/05_23/b3936081_mz018.htm
Related
Reading:
Scientists Develop Next-Generation Memory
Chip
http://times.hankooki.com/lpage/tech/200506/kt2005060309465711800.htm
|
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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.
Swanson’s
reply: The
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.
Related Reading:
The
Brutal Price of a Dollar
http://www.heritage.org/Research/TradeandForeignAid/bg1855.cfm
A Blueprint For Paul
Wolfowitz At The World Bank
http://www.heritage.org/Research/TradeandForeignAid/bg1856.cfm
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.
_______________________________________________
Readings /
‾‾‾‾‾‾‾‾‾‾‾‾
Waiting for Grokster
http://www.technologyreview.com/articles/05/06/wo/wo_060305hellweg.asp?trk=nl
Sun Moves To Buy StorageTek
for $4.1 Billion
http://www.eet.com/news/latest/showArticle.jhtml?articleID=163703041
Some New Tricks For Finding
Data
http://www.siliconvalley.com/mld/siliconvalley/business/columnists/mike_langberg/11753931.htm
Turning To Tech For Cleaner
Water
http://www.siliconvalley.com/mld/siliconvalley/11780859.htm
Analysts Bolster Google Stock
http://www.siliconvalley.com/mld/siliconvalley/11806721.htm
Who’s Going To Own The ‘Here’
Web?
http://www.alwayson-network.com/comments.php?id=9585_0_11_0_C
Tripping On Power
http://www.storagepipeline.com/showArticle.jhtml?articleId=163702787
SBC Ups Ante In Telecom War
http://www.mercurynews.com/mld/mercurynews/business/11795143.htm
McAfee Buys Into Wi-Fi
http://www.redherring.com/Article.aspx?a=12236&hed=McAfee%20Buys%20into%20Wi-Fi
Molecular Transistor Developed
http://www.kurzweilai.net/news/frame.html?main=/news/news_single.html?id%3D4561
Magnetic Resonance Goes Nano
http://www.kurzweilai.net/news/frame.html?main=/news/news_single.html?id%3D4561
Wireless Quantum Crypto Network Unveiled
http://king.trblogs.com/archives/2005/06/wireless_quantu.html?trk=nl
Samsung Starts Making 4-Gbit
Flash on 70-nm Process
http://www.storagepipeline.com/showArticle.jhtml?articleId=163702442
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