2HRS2GO: Lehman takes analyst prose to new heights

COMMENTARY--I apologize to Greg Gore. It's the least I can do after criticizing his work a couple of months ago.

I lambasted Gore, an analyst for W.R. Hambrecht & Co., for tossing Led Zeppelin quotes into a research report. "Is it necessary to be cute in a 28-page report detailing the problems and outlook for e-services consulting?" I whined at the time.

My absolute view hasn't changed. But in retrospect, Gore seems a model of restraint.

Maybe the recent market downturn eroded analysts' sense of self-control. Maybe the parade of profit warnings has caused research firms' editors to light up with glee at any hint of good news, no matter how purplishly worded it may be. Maybe analysts are just bored.

Whatever the reason, the trickle of would-be-prosaic research reports has continued. A PC analyst like Andrew Neff of Bear Stearns points to Dr. Seuss as a humorous source of advice for Dell Computer (Nasdaq: DELL). And Lehman Bros. has gone a step further.

This week's Sycamore Networks (Nasdaq: SCMR) note from Lehman analyst Steven Levy reads like an entry for the Bulwer-Lytton contest. Journalism practice normally dictates brief quotes, but Levy's analysis can only be appreciated through an extended taste of its glory:

"HARBOURING THE STORM:
"The telecommunications spending storm continues to rage on, threatening every ship on the sea. Lightning flashes and thunder claps roar, leaving investors shivering as they cling to their dinghies. Despite these turbulent waters, we continue to see evidence reinforcing the concept that there is still one large island where the seas appear serene. This land is at the core of most public networks and is known as optical transmission systems. Last night we had another glimpse at this island and observed that it appears to be covered with trees, specifically Sycamore trees.

"The trunk of a Sycamore tree is built on sinewy software that serves as its special value-added sauce. Finally, Sycamore trees have strong branches that can withstand winds blowing from all directions and sometimes from many at once. These trees seem to be holding up quite well during the current storm and our forecast is that they are likely to remain one of the fastest growing trees on this telecommunications island.

"Further, the Sycamore trees are now growing bigger than ever, with more branches to support a growing product portfolio and increasingly diversified customer base. While we understand that these trees were only planted around a year and a half ago, they have grown many roots in a short time and appear quite strong in case the telecom storm does hit this island. Recently, many investors and analysts have feared that Sycamore might be the latest company to crash on the rocky shores during the storm.

"The notion that Sycamore was going to have to lower guidance or even under-perform expectations in the period ending January 31 was the main culprit and was certainly understandable given the cloudy forecast for the rest of the telecommunications equipment market. Fortunately, for those that didn't bend in the wind, Sycamore did none of the above and at $22.56 offers a compelling investment opportunity."

Special value-added sauce. You'll never think of Sycamore again without associating it with a Big Mac.

If you made it through the entire excerpt, give yourself a cookie. By the way, that selection was edited slightly for brevity, and to remove some boring parts. Like sentences with numbers.

Levy did follow up "Harbouring the Storm" with a serious, detailed discussion of Sycamore's latest earnings report. His view--that Sycamore remains stronger than skeptics believed--was also expressed by other analysts.

Their conclusions are just easier to read.

Shortly after lamenting the infusion of hard rock lyrics into equity analysis, Gore sent me an e-mail, wondering how I came to single out his work. It was circumstance, more than anything else; I just happened to be going through notes on the W.R. Hambrecht site that morning.

I should have known things would get much worse. In a relative sense, Gore was right; Led Zep sounds pretty good right now.

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