Martin Pyykkonen

Telecom equipment analyst,

CIBC World Markets

CATEGORY: Telecom equipment

STOCK PICKS: Cisco Systems (CSCO), Juniper Networks (JNPR), Inktomi (INKT)

The big bet here is on a new generation of telecom equipment based on Internet technology. For decades, telecom companies used private standards created by companies such as Lucent Technologies Inc. and Nortel Networks Corp. Now they're adopting the open way of the Web. Pyykkonen expects telecom carriers such as WorldCom and AT&T to boost spending sharply on so-called Internet protocol equipment within six months.

His picks are poised to take advantage of that growth. Consider Cisco Systems Inc., a pricey stock at 115 times earnings, compared with an average of 24 for the Standard & Poor's 500. He thinks the company can hold on to at least 75% of the high-end router market as the market grows from $1.7 billion this year to $12 billion in 2003. That should help boost the company's stock, now at $58, to $75 in a year. Another company that will benefit from growth in the high-end router market is Juniper Networks Inc. Pyykkonen thinks the second-largest player could increase its market share from 18% now to 25% over the next year or two. He expects the company's stock to rise from $162 to $300 within a year.

Martin Pyykkonen

Inktomi Corp. is an unconventional stock pick for a telecom equipment analyst, since Inktomi is a software company. But Pyykkonen thinks telecom players will increasingly buy software along with their traditional network gear. Inktomi derives 40% of its revenues from its search-engine technology, which is the guts inside Yahoo!, MSN, and other search sites. The rest comes from software that helps carriers such as AT&T distribute Web traffic in a faster, more efficient manner. Pyykkonen thinks demand for the latter is going to soar in the years ahead--and with it Inktomi's stock--to $150 over the next year, up from $128 today.

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