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Technology Stocks : Newbridge Networks
NN 12.24-2.9%Nov 13 3:59 PM EST
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To: larry pollock who wrote (15969)12/18/1999 2:36:00 PM
From: Doug  Read Replies (1) of 18016
 
Larry: The history of progress in our Free Market world is boom and bust cycles. In the case of Tele Equipments, some one has to pay the suppliers. All eqpt Forecast are based on Reports paid for by the Eqpt providers. Naturally every writer knows how to stroke his master. This is unfortunate but a practice in every Industry.

Let me give you 2 examples of Boom and bust. In the 80's the big push was Energy. State of art Cray computers were used to establish Global supply and forecast price/ demand. The most Conservative Consulatant's report forecast the price of Oil at a minimum of $60 for the 90's. Oil stocks went thru the roof for 2 years until it dawned on the world that they had been taken for a ride. Dome Petroleum ,the largest Cdn Firm in the Oil patch vanished in a mountain of debt whilst owning the worlds largest and best Drilling fleets.

Later we had Air transport forecast. That forecast concluded Aeroplanes would fill the skies. Every one was going to travel by air. Have a look at Boeing stock and check how many bookings for airCraft were cancelled in the last few years.

Now its time for Fibre. With DWDM and line defintion reduced to 1nm., there is going to be a glut of fibre. It is equivalent to a reduction of Oil demand by improving Engine performance by a factor of 10. The Japanese and Europeans also have their Technologies and have caught up quite fast. Take a look at Alcatel in the U.S.

This oversupply is not going to occur overnight but will take about 2 years to materialize. The big TELCO's are facing a cash flow reductin. Check out AT&T stock. Most of the large carriers are seing a drop in revenues. The CLEC's and NSP's are carring more liabilities than assets. If the revenue stream for Carriers and NSP's was that good they would not have to advertise so heavily for Traffic. TELEGLOBE a carrier heavily in debt openly states it is willing to share its lines with any takers. My NSP calls me every week asking me to upgrade and offering more price cuts. One does not see those signs in a Boom. In fact during a Boom, the Consumer goes after the Agent like we all do when houses are in shortage.

The length of any Boom in a particular sector, depends on how well that Industry fares in mopping up the money from the Consumer. The telecom Industry is running into Consumer resistance whch is now resulting in price competition.

The first signs of a peak is a fall in Earnings growth , then increased revenue and decreasing profit.In fact our friends at CSCO have just stated that Growth is decelerating.

Every Boom cycle is followed by a bust.Do you know how they plan to handle that.?
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