CORVIS IPO: WHAT A WINNER!

On Friday, at the height of the Nasdaq massacre, Corvis was floated in an IPO on Wall Street. Corvis had originally priced its IPO at $15 a share when my original column on the Wall Street optics gold rush was written. It broke syndicate at 98 and closed at 84 for a $28 billion market cap, the largest single day valuation of any technology start up in the history of the global capital markets. So those lucky investors who "marked my words" and positioned their portfolios for an allocation in the Corvis IPO indeed made 300 - 500 per cent in a single day.

Those luckier investor who managed to get a pre-IPO allocation in Corvis when it was just another Silicon Valley optics startup eighteen months ago have made up to fifty times their money! This is the power of knowledge capital and real time market intelligence at work on Wall Street, not playing Russian roulette on Nasdaq "investing" in technology stocks with the help of your friendly neighbourhood full commission retail broker or NRI deposit salesman turned private banker in Dubai.

The spectacular success of Corvis is all the more remarkable when you consider its IPO came on a day the Nasdaq got smashed by 179 points, that ten other IPOs were priced this week and that Credit Suisse First Boston, its investment bankers, raised its IPO offer price from $15 to $36 a share. This is a testament to the fact that the world's smart money is convinced that Corvis is going to be one of the twenty first century's seminal technology companies and that its birth is akin to the emergence of colossi such as Cisco, Juniper or Redback in the data networking space.

Corvis is a unique company which has created the first all optical networking franchise in the history of the telecommunications industry. Its founder is Dr David Huber, the legendary optics network engineer who founded Ciena (CIEN) and Cidra, a pre-IPO optical component company.

Corvis provides the first scalable, next generation optical network to telecoms with terabit capacity, its product menu providing the three critical capabilities needed by the bandwidth obsessed global carrier backbone: the longest haul all optic transport capacity, the most sophisticated intelligent optic switches and total integration of its optical products with the carrier's own network management infrastructure.

Their core products include transmitters/receivers used to transport data as optical signals through the network, amplifiers placed periodically across the fiber to compensate for optical signal losses and switches that route optic signals or lightwaves at multiple fiber network connections. Corvis and Williams Corp, a New Age network carrier, have already completed the longest all-optical terrestrial communications transmissions in history. Using Corvis optical switches, data was transmitted on 2.5 gigabits across the 3200 kilometre route on the Williams nationwide fibre optic network without any need for electrical regeneration. This is a fivefold increase over distances achieved by, say, the existing Ciena product. This capability is critical for terabit Internet protocol networks, where all-optical domains results in performance and cost economies of scale for network carriers that were simply not possible without the advent of laser and optics technology. It is no coincidence that Vinod Khosla, the legendary venture capitalist who founded Sun Microsystems and Juniper Networks and is a partner at the Kleiner Perkins VC firm in Palo Alto, sits on the Corvis board of directors.

Corvis and Qwest Communications have already signed a multi-year agreement to provide the Denver telecom's next gen all optic, bandwidth on demand network that will define the Broadband Age of the next decade. This all-optical mesh networks will provide the foundation for an all optical, next generation Internet. Corvis, even as a private company, has made a number of strategic acquisitions in optical technologies. Take Algety, for instance.

Algety Telecom developed soliton based DWDM transmission of 1 terabit a second - the equivalent of transmitting the entire contents of the world's largest library in less than 30 second down a single fibre. In other words, Corvis has created the revolutionary new technology for the birth of the optical Internet, whose myriad applications we cannot yet even begin to fathom.

Corvis has no revenues to date. However, on a conservative estimate, I believe its Qwest, Williams and Broadwing deals will generate $600 million in revenues next year. Its technology lead in optical transport, networking, switches and amplifiers is so great that I can easily imagine it doing $10 billion revenues in the next five years. Think about it. If a company invented electricity, what kind of a P/E multiple would you pay for it?

As an optical networking investor in pre-IPO Silicon Valley deals, Corvis has all the ingredients of becoming a technology gorilla, a Cisco of the 2000's. Why not? If JDS Uniphase can command a $120 billion market cap with a $400 million revenue run rate, why cannot Corvis command a $100 billion valuation on Wall Street? Let Corvis drift down to the 60's as the flippers flip and Nasdaq does its ballet of death above its 200 day moving average.

Corvis is fundamentally headed to $250 in the next two years as its central role in the optics revolution is akin to Cisco's in data networking and Microsoft in software.

Friday, July 28, 2000 will go down in history not as the day Nasdaq plunged by 179 points or the Camp David peace talks broke down.

It will go down in history as the day Wall Street saw the birth of Corvis, a technology superstar of the Optics Age that will change the world in our lifetimes.