"This year, Wall Street’s telecom gear worries started with a Lehman Bros. report on telecom services. The report says telecom service providers get about $2 in revenue for every $1 spent on new gear. But as recently as 1996, telecom gear firms realized revenue of $5 for every $1 spent on gear."
Thread- FWIW the above was the general line pushed out by WS to drive the entire telecom equipment sector down recently. IMVHO, to help create buying opps for the big brokerage houses. I still don't know if the mini-cratering has ended, but I do notice a few retraction type articles and comments have been popping up over the weekend. Typical pattern. Drive it down. Establish positions. Then pump back up.
Really what I thought I would mention was, I recently read from a couple of sources, that the total worldwide SP revenues are roughly $600 billion annually! Now if you use the 1:2 figures I've seen quoted lately, it means that telecom spending is about $300 billion annually. This includes everything-- Hardware, software, and services.
Now if you go back to an upstream post of mine (http://www.siliconinvestor.com/readmsg.aspx?msgid=12573064) you'll see that ADCT's CEO, Bill Cadogan has been saying the TAM is about that large for companies like ADCT.
We're excited to be a leading supplier to a worldwide industry that spends over $1 billion daily on equipment, software and services to build and upgrade communications networks. Building and upgrading the 'last mile/kilometer`` of the network is indeed the sweet spot of communications capital spending.'
I always knew it was LARGE market but I didn't think it was quite $365 billion per year. But $300 billion annual spending would not surprise me at all. So IMO, I think the 1:2 figure is fairly accurate.
Very interesting because no matter how you slice it, this is the TAM for ALL telecom equipment companies today. Any telecom investor has to keep this figure in mind. The big question is, 1) can this TAM expand? If not, then 2) can your investment take advantage of the large shifts in spending to new spaces? Or 3) can your investment take more market share away from competitors?
Personally I seem to spend a great deal of time on number 2. Number 1- I just don't know how to figure. Number 3- You almost have to be in the equipment business professionally to do an evaluation or rely on analysts(who ALWAYS have an axe to grind) reports. But it's tricky picking the good analysts from the bad ones. So this is a fanstastic reason to follow this thread, and the FCTF thread. Lots of telecom professionals share their experiences on both threads and I'm always appreciative of this. Thanks. -MikeM(From Florida)
WS- Wall Street
FWIW- for what it's worth
IMVHO- in my very humble opinion
SP- service provider
TAM- total available market
FCTF- The *NEW* Frank Coluccio Technology Forum thread |
