Robbie Stevens Telecom spending report. I am posting comment below. I guess they go contrary to the Sanford Bernstein report. The report itself is long and I have posted the opening comments only.
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N E T W O R K I N G H A R D W A R E
R E S E A R C H
October 3, 2000
NEXT GENERATION NETWORKS
As We See It, Current Debate Over Capital Spending Is Healthy, but Negative
View Is Wrong; Reiterate Buy Recommendation on Next Generation Equipment
Vendors
Paul Johnson, CFA (212) 407-0415 paul_johnson@rsco.com
Ara Mizrakjian (212) 407-0406 ara_mizrakjian@rsco.com
Pete Carrillo (212) 407-0444 pete_carrillo@rsco.com
Key Points:
· We agree that the current debate over capital spending by carriers in 2001 and
beyond is a healthy activity. However, the recent view expressed by several analysts
that spending is about to head into a tailspin is wrong, in our opinion.
· Despite the convincing argument that the level of carrier spending is at an all time
high, suggesting that the growth in spending will have to be moderate next year, and
we believe that the future will shape up differently.
· With all of the new services beginning to emerge, carriers will have no choice but to
continue to invest in their networks. At the end of the day, carriers must pay to play.
· It should be of no surprise that carriers are being forced to redefine their strategies,
their value proposition, and, in many times, their business models. All of the carriers
are frantically searching for those new “killer apps” that are expected to drive unit
volume, revenue growth, extend the rapidly eroding competitive advantage, and find
areas to compete away from the herding masses of the other telecommunications
vendors. Is it no wonder that capital spending has accelerated. Old services are
delivered off of old platforms; new services are delivered off of new platforms. The
direct result of this growing level of competition is accelerating spending on network
and telecommunications equipment. Unless, somehow, these competitive pressures
are expected to abate in 2001, the spending spree will continue. In our view, until the
new applications are discovered, the new killer apps are released, competitive
pressures abate, or all of the carriers go out of business (suggested by one of our
competitors), carriers will have absolutely no option but the continued deployment of
new equipment. |
