Cisco (CSCO) announced its intention to sell $4 billion in debt, and unlike most following the company, we don’t think it is earmarked for acquisitions.

The Offering

We looked at Japanese bandwidth use in the past and concluded that widespread FTTH deployment is not creating a dramatic jump in bandwidth growth. A recent paper out of Japan with updated data reinforces this conclusion.

Japan is by far the world's largest FTTH deployment and is the best proxy for predicting future of traffic growth as a result of faster broadband speeds. It also doesn’t hurt that Japanese statistics are both plentiful and as unbiased as one can find. The Japanese Ministry of Internal Affairs and Communications [MIC] is tasked with tracking statistics for all things telecom in Japan. It has great data and it is all free.

Sacred cows are always slaughtered last. Ciena (CIEN) gave the equity markets an unwelcome surprise yesterday and triggered a broad market sell off in the sector. This event challenges Ciena’s status as a sector favorite as well as the perception that a video boom will save us all.

Finisar’s (FNSR) Q408 Earnings Call was June 12 (Call Transcript). Since then the stock has declined nearly 25%, reflecting what we believe is a general dissatisfaction with revenue growth guidance of 10-15%. This guidance appears conservative.

Broadcom is entering the PON chip market and has secured design wins with a major tier-1 equipment vendor. While this is something predicted here, the timetable was sooner than expected. This will have a substantial impact on FTTH component and equipment suppliers as well as the carrier currently conducting lab trials with the device.

Just as the market abandoned hope of consolidation it strikes. The dust has settled from the merger announcement between Finisar (FNSR) and Optium (OPTM) and in plain terms it is a brilliant move. Finisar is already a leader in the industry but this puts them in an even stronger position than before. This series of posts looks at why it is happening, who benefits, who loses, and suggests what is likely to happen next.

Andrew Odlyzko, best known for his objective commentary on Internet traffic growth, spoke at the 2008 Gilder/Forbes Telecosm Conference. He helped clarify what really matters in the debate about Internet bandwidth growth. Consider this a survival guide in a time where “Internet traffic growth rates are slowing and Hype is accelerating.”

Salesforce (CRM) – Have takeover rumors come home to roost at Salesforce.com? The company, whose so-called “Platform as a Service” concept allows businesses to develop online applications without costly infrastructure investments, received positive attention in a Minyanville column yesterday touting it as a possible takeover stock, expressing wonderment that someone of Larry Ellison’s caliber hadn’t yet spoken for the company. The first inklings of bullish rumors coursing through the options came this morning, with a 12.8% spike in implied volatility to 47%, making Salesforce.com  one of the day’s top implied volatility gainers as its shares set a new 52-week high at $72.47. The take higher in volatility was accompanied by heavy buying interest in the conspicuously out-of-the-money June 80 calls, which traded for about $1.00 apiece on volume of 4,940 lots, where open interest numbered no more than 574 lots previously. Until today, the 122,500-strong open interest in Salesforce.com showed a fairly even split between puts and calls, making today’s 7-to-1 privilege of calls an eye-catching development indeed.

Monster Worldwide (MNST) – A similar dynamic appeared to move lots this morning in another evergreen rumor-stock, recruitment and job-search site Monster Worldwide. An early doubling in option volume against the normal daily average occurred as shares trading 2.5% higher at $24.98, and we saw a rash of buying in June 25 and 30 calls. Monster shares dipped decisively below $30 around the first of the year and have loitered consistently around the mid-20’s ever since, two spikes higher in February notwithstanding (both, incidentally, on takeover rumors).

John Meynard Keynes is rolling over in his grave. While we’re no fan of Keynesian policies, the raw economics are valid. That being said, the latest plan by the US government to pump $146B into the pockets of American consumers is the bluntest type of instrument that a Keynesian can employ. It is a prostitution of Keynes’s intent.

Let’s put this largess into a perspective that readers will understand. $150B would allow every household in the US to be wired with municipal Fiber to the Home [FTTH]. Figure 100m American households at an average cost of $1500 (Verizon (VZ) is doing it for about this number, and that includes equipment) and you hit the $150B number right on the nose.

Ikanos (IKAN) reached an agreement to acquire Centillium (CTLM)’s DSL chipset assets for $12M. This is a shockingly low price and it sets a new valuation floor for telecom component revenue streams that most people in the industry, including us, viewed as annuity assets worth much more. It should also force investors to question whether company cash flows are being invested in new products that will generate superior returns.

The transaction itself was not a surprise as it was something we viewed as inevitable (see "DSL Market Consolidation Dynamics" ). The price was a surprise.

CES 2008 is best remembered as the year when it became fashionable for the media to question the relevance of this uber-convention, and for many to skip attendance altogether. Given the intense and in-depth media coverage of the show, attendance should no longer be considered mandatory unless you’re trying to tease out the trends and make the observations missed by the mainstream media. This is what we took away from the show and what readers will find relevant:

In-Home Networking

One of our more popular theme pieces (see “Five Misconceptions About the 10G Optical Market“) examined the state of the 10GbE market and sought to identify the gaps between market perception and reality. It’s time to publish an update with the facts we have collected and opinions we’ve formed since then.

Growth? Is That Really You?

The market for optical modules in Enterprise applications (primarily 1/2/4G SFP’s) suffered through years of secular anemic growth, beginning in 2002 when shipments of copper based GigE ports overtook shipments of fiber based GigE ports. The emergence of copper based GigE effectively capped unit volume growth in the optical business while exposing participants to declining prices as they fought for a share of a fixed pie.

Lane Patterson, Chief Technologist of Equinix (EQIX), shared his thoughts on data centers and the challenges facing his industry at the 2007 Gilder Telecosm conference. He coined the term ‘bitmile’ and shed some light on how application providers such as CDN’s are adjusting their optical transport architectures to optimize cost.

Equinix provides data centers for collocation and interconnect. They build their own or lease a property from companies like Digital Realty Trust (DLR) and equip it with connectivity and additional infrastructure. Then they sublet the space to companies looking for data center space - everyone from Carriers to CDN’s to Web 2.0 service providers. Google (GOOG), Yahoo (YHOO) and a few others build their own mega data centers - for everyone else there is Equinix. Lane used an airline analogy; they are not a carrier but more like an airport where various carriers meet to exchange passengers.

I’ve found the fracas regarding Apple (AAPL) and the recent release of software for the iPhone rather ironic and worthy of comment.

The iPhone was introduced as a standalone consumer electronic device with little or no modification possible by third parties. In the months since launch, the iPhone attracted hackers by the dozens who bypassed the phones security functions to add many interesting applications, as well as unlock the device for use on any GSM/EDGE network.

The ongoing consolidation of DSL chip suppliers should create a positive structural effect on pricing and improve the overall health of the remaining players. Dave Burstein of DSL Prime fame points out that Broadcom (BRCM), Infineon (IFX), Conexant (CNXT), and Ikanos (IKAN) now account for 95% of DSL chipset market share. This is extremely positive.

From DSL Prime, September 12th:

Lately my RSS News Feed reader is bursting with news and opinion about Apple (AAPL), the iPhone price cut, and who did what to whom and why. If you don’t know what I am talking about then consider yourself lucky because it is all meaningless noise.

Ikanos (IKAN) announced last week that it would pay a ‘leading European OEM’ $1.6M in return for a development agreement. The OEM is most likely Alcatel. This is a very odd deal and is worthy of closer examination.

From the release:

A magician is successful by making the audience focus on one hand while the other engages in hidden behavior. Google’s (GOOG) proclamations that it is not evil are corporate PR sleights of hand, and should raise, not lower, the awareness of users of the ways it might indeed be evil. This week's