To All, FYI....
Long term ERICY will be vindicated
This story was originally published Wednesday
By Rivka Tadjer
Barron's Online
NEW YORK (Dow Jones)--Many stocks were pummeled in the July-August Wall Street massacre, and telecommunications equipment manufacturers were no exception. High-flying Lucent Technologies Inc. (LU) lost 35% of its value, from a 52-week intraday high of 108 1/2 to a recent low of 70 7/8; Northern Telecom Ltd. (NT) dropped 37%; American Depositary Receipts of Finland's Nokia (NOKA) gave back 29%, and ADRs of Alcatel (ALA) slid 36% from their peak.
Why? Well, round up the usual suspects, but investors were especially concerned that these capital-intensive companies are particularly vulnerable to economic slowdowns in the developed world and to the implosion of Asia, once a showcase growth market for building telecom infrastructure. But even though the global economic problems are real, some analysts argue that over time the telecom equipment market will thrive as service providers around the globe build new networks and upgrade their old ones for the digital ageyand that current share prices don't reflect these companies' potential.
"Telecom equipment is the next'growth industry," says Greg Geiling, telecom equipment analyst for J.P. Morgan. "Deregulation and privatization, and growth of the Internet all add up to this market segment growing ›in the! mid-teen range over the next two years."
Steve Levy, telecom analyst at Lehman Brothers, adds that we'll see lots of merger and acquisition activity over the next couple of years, as market leaders scramble to meet all their customers' needs - even if it means buying someone else to help them do it. That's why telecom equipment supplier Northern Telecom bought networking company Bay Networks. As of Oct. 1, Lucent will be free to pay for big acquisitions with stock, and Levy and others expect it, too, to buy a big networker like Ascend Communications Inc. (ASND).
Long-distance carriers, local phone companies and other existing service providers are under intense competitive pressure to upgrade their existing copper and fiber networks to allow more data to flow through it, while upstart like Qwest Communications International Inc. (QWST) and, to some degree, Worldcom are building state-of-the-art networks from scratch. "This adds up to buying a lot of telecommunications equipment," says Levy. The emergence of Internet telephony will surely spur more equipment sales as well (see Dvorak oTechnology, "Internet Telephony Is the Next Wave").
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