On December 28, 1998, we formed a small group of internet issues that in our
opinion should trade dramatically lower from current levels on that specific
day. Since then we have added additional candidate to our list of overvalued
"cyberspaced" issues. This month we are adding SCMR.
Sycamore Networks Inc. (SCMR) - the company uses technology that lets phone
companies and others transmit data solely on wavelengths of light, unlike
current technology that requires optical signals traveling across fibers to be
converted into electrical signals. This stuff sounds great, but give me a
break! For the fiscal year ended 7/31/99, revenues totaled $11.3 million, while
losses totaled $19.5 million.
At present, SCMR (sounds like the word scammer) has the most unbelievable
market cap when one considers that this company has only been around for about
one year, has meager revenues and huge losses. At present (share price $250 -
came public @ $38 and zoomed the first day to $270). SCMR has a market cap of
$20 billion, has a book value of around $3.91 and cash of $3.60, based upon 80
million shares fully diluted with 7.5 million free trading share in the float.
We just don't understand why investors would risk so much for so little. In our
opinion, the current valuation is totally crazy.
According to information that we obtained concerning SCMR, it revealed that
the company's product is targeted at perhaps 20 or 30 leading
telecommunications carriers in the country. The company intends to emerge as
the leader in the optical market, moving into lower-end optical switch markets.
With a $20 billion market cap, SCMR must have plenty of rabbits up their
sleeves. This is a great short! PS: when the 144 stock lockup period is up, the
floodgates will release even more shares, driving shares of SCMR lower. We
intend to monitor SCMR in our "Internet Bubble Portfolio" for
percentage gain performance.
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