Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
NOTE: I have cross-posted this on the JDSU and FrozenCanuck's FiberHead Friends boards.

Could my two biggest investments get into a fist fight? What does happen when a King (JDSU) goes head-to-head with a young Gorilla (BRCM)?


Broadcom Enters Optical Networking Market with World's First 10-Gigabit 4-Channel CMOS Transceiver; Transceiver Extends Ethernet Networking into the WAN


http://boards.fool.com/Message.asp?id=1070408000984000&sort=postdate

long JDSU and BRCM,
Jon
Print the post Back To Top
No. of Recommendations: 2
Could my two biggest investments get into a fist fight? What does happen when a King (JDSU) goes head-to-head with a young Gorilla (BRCM)?

Broadcom is in a royalty game, not a gorilla game.


BB

Print the post Back To Top
No. of Recommendations: 2
Broadcom is in a royalty game, not a gorilla game.

In my opinion, the same is true for JDSU. I am (very) long on JDSU, but it looks like a King not a Gorilla.

There are large barriers to entry so new competition is unlikely - but established competition continues. To my knowledge (please correct me if I am wrong here), JDSU does not have a proprietary technology. Ideally, JDSU will develop open and proprietary standards based on an industry desire to sustain the hypergrowth market. If this favors the establishment of certain component standards based around existing proprietary JDSU equipment then we get into a Gorilla game. This will only come about if it is in the best interest of the industry ... usually because it minimized the number of different proprietary standards that other value chain suppliers must conform to.

Right now this industry is operating in an early tornado market. As it stands JDSU will do outstanding so long as demand outstrips all suppliers manufacturing capacity (especially given the barriers to entry for any new competitor). The real difference between a King and a Gorilla will emerge later when the market hypergrowth slows down. I am keeping my fingers crossed that JDSU will emerge as a gorilla.


Print the post Back To Top
No. of Recommendations: 1
There are large barriers to entry so new competition is unlikely - but established competition continues.
To my knowledge (please correct me if I am wrong here), JDSU does not have a proprietary technology.


Well, let's see. There are barriers to entry into the optical networking equipment market but the flood of promising new companies entering that market is daunting. Here's a nice post from "GorillaGorilla" (formerly "YouJest"):

http://boards.fool.com/Message.asp?id=1360002000454000

It doesn't exactly address the picks and shovels players but you get a taste of the ever changing nature of this market and the increasing importance of JDSUs execution.

As for proprietary technology, JDSU owns many, many patents, they just don't own any that have been accepted as the industry standard to my knowledge. Products from competing producers are largely still interchangeable.

For further (I spose I shouldn't say further, since my post was not, particularly) highly informative discussion, and very helpful posters, visit:

http://boards.fool.com/Messages.asp?id=1380365000000000

Go back about two weeks on that board and look for "Frozen Canuck"s synopsis of the (insert acronym here) conference he attended. It's a doozy.

If you can't find it, I'm sure he'd point you to it.

Good luck!
Print the post Back To Top
No. of Recommendations: 10
robrat wrote:

In my opinion, the same is true for JDSU. I am (very) long on JDSU, but it looks like a King not a Gorilla.......The real difference between a King and a Gorilla will emerge later when the market hypergrowth slows down. I am keeping my fingers crossed that JDSU will emerge as a gorilla.

I was in a hurry when I posted my brief comment that Broadcom is in a royalty game, not a gorilla game in response to Jon80FLT's question:

Could my two biggest investments get into a fist fight? What does happen when a King (JDSU) goes head-to-head with a young Gorilla (BRCM)?

I simply didn't want anyone to confuse some royalty plays with gorilla plays. That doesn't mean I don't think both JDS Uniphase and Broadcom are excellent investments. I hold shares in both companies. If we apply the GG criteria, summarized so well by Uncle Frank at Silicon Investor and listed on the FAQ on that thread, discussion would end with Broadcom and JDS Uniphase competing in royalty games in dominant positions.

A summary of my check list in Gorilla hunting:

1. discontinuous innovation
2. proprietary open architecture
3. high barriers to entry
4. high switching costs
5. strong value chain formation
6. tornado market existant or foreseeable.

Keeping your fingers crossed that King JDS Uniphase emerges from the tornado as a gorilla won't, unfortunately, change the criteria of the game it is involved which is a royalty game. It's an excellent investment, but in the context of gorilla gaming, it is appropriate to identify it correctly using the gorilla game criteria and terminology of what a gorilla is. The same should be said for Broadcom.

Here I go again with my comments which are not meant to be high and mighty. I'm simply reporting that what others have found when applying and reviewing all of the criteria to both JDS Uniphase and Broadcom reveal that the conclusions are royalty games. A King needs at least 2x the market share of the nearest competitor. JDS Uniphase has this position. If I had the time to provide some links to previous discussions about JDS Uniphase, I would - including Geoff Moore's comments. Yet, I've got to jump in the shower and head off to work.

Once again, both Broadcom and JDS Uniphase are excellent investments in my opinion due to their dominant positions and the growth both will continue to experience. I've made a lot of money in royalty games over the years, but investors need to understand the risks involved in royalty games and not confuse them with gorilla games. Both games have their unique risk/reward scenarios.

BB










Print the post Back To Top
No. of Recommendations: 7
BruceBrown wrote

A summary of my check list in Gorilla hunting:

1. discontinuous innovation
2. proprietary open architecture
3. high barriers to entry
4. high switching costs
5. strong value chain formation
6. tornado market existant or foreseeable.


Yes, indeed that is the Gorilla game. You said that 'keeping your fingers crossed that King JDS Uniphase emerges from the tornado as a gorilla won't, unfortunately, change the criteria of the game it is involved which is a royalty game.'

I am not convinced of your logic. Certainly we are in a tornado with fiber optics and this is clearly discontinuous innovation versus electrical routers/switches, etc.

What is currently keeping JDSU in a King game rather than a Gorilla game is that we are not currently aware of any proprietary / open standards. However, these can still emerge. JDSU has a rich portfolio of patents for a wide range of photonics related equipment. We are all well aware that the entire value chain from JDSU - NT/Lu - WCOM/GBLX, etc are all scrambling as fast as they can to install capacity. Industry wide (non proprietary) standards could conceivably give way to proprietary (but open) standards if the value chain determines this will be in everyones best interest. You could expect such a decision if this minimizes everyones cost, the majority already purchase from JDSU and finally JDSU finds a proprietary technology that significantly advances everyones net value. An example could be a proprietary all-photonics switch that JDSU publishes standards for but for which it retains proprietary rights to manufacture (just and example, you could think of others).

While this photonics tornado is going on a lot can happen. Given the value chains main emphasis to reduce cost and ramp up manufacturing as fast as possible, nearly anything seems possible. I think it is extremely hard to determine (without good insider information) whether JDSU can emerge as a Gorilla.

For now, it still looks like a King and for now that is more than adequate.
Print the post Back To Top
No. of Recommendations: 5
B. Brown:
>>I simply didn't want anyone to confuse some royalty plays with gorilla plays...

Here I go again with my comments which are not meant to be high and mighty. I'm simply reporting that what others have found when applying and reviewing all of the criteria...
<<



And if you (or someone else) didn't --- this board would hardly be worth reading. JMHO.

Thanks again.

-M.
Print the post Back To Top