S A ADVISORY November - December 1999


S.A. Advisory
2274 Arbor Lane #3
Salt Lake City, Utah 84117

On December 28, 1998, we formed a small group of internet issues that in our opinion should trade dramatically lower from current levels on that specific day. Since then we have added additional candidate to our list of overvalued "cyberspaced" issues. This month we are adding SCMR.

Sycamore Networks Inc. (SCMR) - the company uses technology that lets phone companies and others transmit data solely on wavelengths of light, unlike current technology that requires optical signals traveling across fibers to be converted into electrical signals. This stuff sounds great, but give me a break! For the fiscal year ended 7/31/99, revenues totaled $11.3 million, while losses totaled $19.5 million.

At present, SCMR (sounds like the word scammer) has the most unbelievable market cap when one considers that this company has only been around for about one year, has meager revenues and huge losses. At present (share price $250 - came public @ $38 and zoomed the first day to $270). SCMR has a market cap of $20 billion, has a book value of around $3.91 and cash of $3.60, based upon 80 million shares fully diluted with 7.5 million free trading share in the float. We just don't understand why investors would risk so much for so little. In our opinion, the current valuation is totally crazy.

According to information that we obtained concerning SCMR, it revealed that the company's product is targeted at perhaps 20 or 30 leading telecommunications carriers in the country. The company intends to emerge as the leader in the optical market, moving into lower-end optical switch markets. With a $20 billion market cap, SCMR must have plenty of rabbits up their sleeves. This is a great short! PS: when the 144 stock lockup period is up, the floodgates will release even more shares, driving shares of SCMR lower. We intend to monitor SCMR in our "Internet Bubble Portfolio" for percentage gain performance.


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