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Avanex: Feel the Power of the PowerMux

Jewel in the Eye of a Technology Guru

Those investors who are familiar with George Gilder's Technology Report have undoubtedly came across a fiber optic company called Avanex {AVNX}. Gilder has been so impressed with the company that he has added it to his vaunted Telecosm Table and written a feature about AVNX in his latest book, The Telecosm. Avanex has attracted the glowing sentiments of this widely-known technology guru because of its star product, the PowerMux.

PowerMux

The PowerMux is a DWDM multiplexer-demultiplexer that allows customers to use more bandwidth than they could with similar equipment from competing DWDM companies. This advantage is realized through the PowerMux's ability to process any number of optical signals at any channel spacing and at any bit rate. This vital ability enables users to constantly upgrade their networks to satisfy ever-increasing bandwidth needs. In contrast, competing products are less focused on network expandability than they are with the capacity of individual optical fibers. With such a key advantage resting on Avanex's shoulders, it is no wonder that the company became a Wall Street darling.

Not Immune from Tech Bear Market

Get off the phone with your broker! Avanex has revealed serious chinks in its armor, since it has warned of weaker than expected results three times this year. Continued weakness at fallen telecom angel Worldcom {WCOM} appears to be one of the primary culprits behind the upheaval of AVNX's seemingly unstoppable growth trend in 2000. How can one customer have such a significant impact on a fast grower like Avanex? The answer to that question is also the company's biggest risk going forward: Worldcom accounts for around half of Avanex's revenues. This level of concentration must reduced substantially if AVNX is to realize its enormous potential over the long term. Being so dependant on a deadweight like Worldcom will keep this tech superstar grounded. If Avanex can expand its customer base, the potential for the company to resume its torrid growth and develop into a Wall Street darling again, certainly exists.