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aus "The Motley Fool":
LightPath Shines On
By Brian Lund (TMF Tardior) March 8, 2000
While the major market indices have refracted down this week, LightPath Technologies (Nasdaq: LPTHA) has reflected skyward. The optics company announced on Monday that it has been qualified by Avenex Corporation (Nasdaq: AVNX) to supply high-performance optical components for its telecommunications products. The news had sent LightPath's stock up 38% by Tuesday's close, which brings the company's gain since November 1 to about 1700%.
LightPath started its journey in 1985, when it was looking for a way to improve solar-energy technology. In the course of its research, LightPath developed its patented Gradium glass. Because of its exceptionally precise refractive qualities that allow it to redirect light with optimal efficiency, Gradium has been widely used in laser systems.
In 1997, LightPath redirected its focus to optical networking through a subsidiary called LightChip, in which AT&T Ventures took a $5 million stake in 1998. AT&T ponied up another $16 million in a second round of funding last December. LightChip refined its glass-polishing and laser-fusion techniques, which led to LightPath's development of a breakthrough product late last month, when the company unveiled a new collimator that is expected to yield insertion losses consistently below 0.1dB per pair. That yield is two to three times better than current collimators.
Sound like Greek to you? It's Latin, actually. A collimator filters (limator) light into unison (col-), producing parallel rays. That's very important, because optical fiber guides light waves from one end to the other end by reflecting it within the core. Controlling the angle at which the light waves are transmitted makes it possible to control how efficiently they reach their destination. As the collimator reduces refraction, it becomes able to transmit signals over longer distances while using fewer regenerators (amplifiers). This reduces cost and improves reliability.
LightPath's collimator is pretty big news, so long as it receives some attention from the industry. That may be why the Avenex announcement stoked the stock as much as the collimator itself. Avenex, a manufacturer of processors for optical networks, has recently seen its market capitalization approach $16 billion on about $11 million in revenue, after a high-profile initial public offering on February 4. While it may not provide enormous revenue for LightPath in the near term, Avenex has brought highly visible validation to LightPath's technologies.
LightPath has more to come. It has built a new collimator production facility, providing automated manufacturing in a mostly hand-assembly market. It is also expected to introduce soon a 1xN fiber-optic mechanical switch, which it has co-developed with E-Tek Dynamics (Nasdaq: ETEK).
The company is not without significant risks, of course. Revenues were up 30% last year, topping $1 million for the first time, and grew only 9% last quarter. Those are not stunning growth rates for a young, richly valued company. Costs, meanwhile, rose 20%, almost entirely because of increases in SG&A, while the company spent only 8.7% more on research and development (R&D) last quarter and 9% last year. Since LightPath's entire valuation is based on future product development, those figures are not heartening. What's more, LightPath's heavy use of warrants, options, and redeemable preferred stock have led to share dilution and big dividend costs.
Nevertheless, LightPath has qualities a lot of current, flash-in-the-pan stocks lack: lots of cash; smart backing for LightChip from AT&T; heavy patent protection; proven ability to develop relevant products through in-house R&D; and vital technologies that provide speed and cost-efficiency to a rapidly expanding field. If its products live up to their billing, LightPath has an extremely bright future. |