This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

July 1, 2008 - Sycamore Networks (SCMR-NASDAQ) makes optical switches used by communications service providers to build fiber-optic networks. Sycamore's switches and network management software enable phone service carriers to provide voice and high-speed data services. The company also serves ISPs and cable companies. It sells directly and through resellers and distributors. Major customers include Sprint Nextel (53% of sales in fiscal 2007) and Vodafone Group (16%).

The April quarter didn't show well. Revenues were down 50% to $21 million. One customer didn't come through with expected order levels. With Sprint Nextel and Vodafone representing almost 70% of Sycamore's business in 2007, it's obvious the company is highly reliant on these two continuing to do well. When they don't, SCMR feels it.

The bottom line was negatively affected by the revenue shortage, with a loss of 1 cent a share (well below the positive 4 cents expected). Helping assuage the loss was interest income. With almost $730 million in cash, the company invests in securities and other investments to help cover operating losses. For the year, analysts look for 8 cents and next year 7 cents (with a range of 2 cents to 10 cents). For this quarter and next, they see earnings at 0.

The bright spot for SCMR is the ever increasing need for bandwidth from fixed-line and mobile network operators. Management declared its intent to go after more telecom providers, to broaden its revenue base. Until it does that, investors will be gun shy, knowing that too much depends on 2 providers to make this company profitable.

Another point of light: Chairman Gururaj Deshpande and CEO Daniel Smith each own about 16% of the company. When the two top officers have this much at stake, they stay focused on buiding shareholder wealth. It's in their own self interest.

Other numbers: Revenues were $156 million last year. Look for $126 million this year and $134 million next year. Net profit margin was 15.2% last year. Book Value is $3.52. Cash is $2.57 a share. There is no debt. Current assets outweigh current liabilities 22 to 1. There is no dividend. Market cap is $950 million on 283.854 million shares.

As usual, there's plenty here to delve into. Will the company win new customers? If so, earnings should pop nicely. If it doesn't and its 2 major clients curtail spending, the stock isn't going anywhere but down. On the other hand, there's plenty of cash to wait out any storm. Or management could buy another company to enhance revenues. The stock is selling below book value and almost on top of its cash value. You're paying very little for the company itself. Makes for some intriguing research.

- Company Web site: www.sycamorenet.com

- Ted Allrich