ONI Systems rose 22 percent Tuesday after two Wall Street analysts said they
expect the optical equipment maker to beat Wall Street expectations.
The San Jose, Calif.-based company rose $8.94 to $49 on volume of 8.3
million shares, nearly three times the stock's average daily volume.
Thomas Weisel Partners analyst Hasan Imam initiated coverage on the company
with a "market perform" rating and said there is a significant chance
the company will beat Wall Street expectations of $180 million in revenue
Alexander Henderson of Salomon Smith Barney also issued an upbeat report on
the company and believes ONI will beat his fourth-quarter revenue estimate
of $20.5 million. Wall Street generally expects ONI to generate $20 million
in fourth-quarter revenue, according to First Call. ONI reports its
quarterly financial results next month.
Both analysts regard ONI as an attractive investment in the metropolitan
networking sector, even though they predict losses for the company until the
fourth quarter of 2001.
ONI makes equipment for optical networks in metropolitan areas, a key growth
area for the industry over the next five years. Competitors include Ciena,
Sycamore Networks and Redback Networks, among others.
The metro market
differs from long-haul networks, the long-distance networks that link
metropolitan areas and that have received more investment. Many communications
carriers are building metropolitan networks to connect business customers to
the new high-speed backbone systems that have recently been completed.
According to a study by Dell'Oro
Group, the metro networking market, in its embryonic stages, will grow at a
fast pace in the coming years. In 2000, the market was valued around $383
million, and Dell'Oro predicts that will balloon to $3.1 billion by 2005, an increase of more than 700 percent.
ONI's stock jumped Tuesday despite the recent expiration of a so-called
lockup period that released more than 79 million shares on the market.
"An expiration of a lockup is no reason to push a stock higher," said Lon
Gerber, director of research at InsiderScores.com, a Web site that tracks
insider stock trading.
The addition of extra shares usually sends a stock down because the supply
of available shares increases, thus diluting the value of existing shares,
In fact, many people have considered selling shares of ONI over the past two
months, according to InsiderScores, which tracked those regulatory
filings with the Securities and Exchange Commission.
A shareholder must file documents with the SEC if they meet certain
requirements, including being an "affiliate" of the company. Most senior
company executives must file documents with the SEC indicating their intent
to sell stock.
InsiderScores estimates insider sales of more than $83 million since
In Tuesday's analyst reports, Thomas Weisel called the lockup expiration
"an attractive buying opportunity," and Salomon believes the passing of the
lockup expiration will allow Wall Street to focus on ONI's earnings
release Feb. 8.
ONI is expected to post of loss of 11 cents per share for the fourth