Lutz,
I am no technical guru like Frank Colluccio, and I won't even try to play one on SI. However, I think you hit the nail right on the head. Let's dumb it down with an analogy to everyone's recently forgotten favorite topic B2B.
If a company buys everything it needs through conventional purchasing methods, using a 50 year-old man who has been with the company 25 years, and makes $50k per year despite the fact that any 22 year-old recent college grad could and would do it for $30k, to fill out requisition forms, send them off, file the papers upon receipt, track the invoices, etc. We all understand each transaction may cost $200 per purchase. Then along comes Ariba, or whoever (I have never owned ARBA, unfortunately), and by spending $500k on a system, and bringing in a new clerk for $20k a year to do data entry, each procurement now costs $10. You would have a payback time which this investment paid for itself, and contributed to the company's bottom line. It is standard business fare--analysis of new alternatives to make more money.
The way I see this issue is similar. WorldCom and AT&T has huge staffs of old people handwriting letter and paperwork with their copper-based and SONET-based networks. The Internet hits. MFNX starts laying fiber all over the place. Qwest and Level 3 are building huge networks. Global Crossing talks fiber under the Atlantic. All in the name of finding cheaper data transmission, voice or any other electronic media. The ARBA solution to the old procurement guy inefficiency.
What ultimately happens? By using old methods, it eventually will affect the pricing and competitiveness of those companies. If they do not change, they eventually get usurped.
These thoughts all occurred to me as I pondered a WCOM bear's thoughts about 2 years ago, when everyone and their brother said WCOM was a must own. I bought MFNX and QWST instead.
So now WCOM talks capex slowdown next year. Back to my analogy, does that mean they fire some old people handwriting procurement req's, or do they be stubborn, and continue to ignore ARBA's solution? In my opinion, if WCOM does not increase spending on optical networking equipment, and make every effort to upgrade and compete with the LVLT's of the world, they will become another Xerox.
I understand there are more complexities involved--extended credit, lack of equity due to the market corrections this year, etc. But to stop moving forward to these new products that will both save money and advance communications and information flow, which despite Al Gore and Bill Clinton's belief that they caused this economic boom is the real reason behind all of this, makes little sense to me.
Broadband will change the world. It is not being deployed to everyone as fast and efficiently as we had hoped for 3 years ago. Whomever ultimately provides it to the masses will make an obscene amount of money, and unless a major recession happens, risk captial will be available to chase this pot of gold. WCOM cannot afford to stop--they will have to cut back on SONET equipment first, before optical.
Last, this also hinges on the optical companies continuing to develop new products, and prove payback times and cost efficiencies to encourage future spending. They may be in the first inning of this game, as some have said, but it would be easy for them to throw some straight fastball down the pipe that get hammered out of the yard. From what I heard in the CC here, they feel like a physical Roger Clemens with the brain of Orel Hershiser. Good enough for me.
Sorry to all who trudged through this and found me too simple, or just wrong. I just call them as I see them, and I fail to understand the Cramer/capex slowing argument here. Smells like ulterior motives at this point to me, because if JDSU is 150 in 4 months, all of those folks will be saying what a great opportunity 65 was, just like JNPR yesterday. At 159!?!?! <painful grin due to missing that>
G |
