Also notable in Sprint's guidance this morning was the anticipated increase in 2001 capex to $6.2 bln from $5 bln in 2000; Merrill Lynch notes that it had assumed $4 bln capex in 2001, and thus sees this as one of the first instances of a company increasing capex forecasts. Could be a positive for the optical sector today.
Not surprising considering what we saw in the RHK numbers.
Now, let me share what I consider among the most profound comments made at the conference. Scott Kriens, JNPR CEO, talked about the laws of natural boundaries. "Markets under the pressure of innovation and expansion will segment. . . winners will focus and expand within those segments. . . markets will re-segment into companies that are 'right sized' and not necessarily with one winner in each space." He suggested there could be two in each space. The driving force is competition and the rate of change which is now at unprecedented levels.
The boundaries he suggests for telecommunications are 1) transport 2) processing and 3) applications.
Where are we today?
* old business models are creaking
* new business models are still taking shape
* speculation is moving from rampant to rational
* innovation is in its infancy
* value of execution is increasing
[Stick with me, he gets better. . .]
Predicting the future?
* change will happen fast
* in last 5 years there were more winners than losers (losing IPOs "only" went up 5X. . .)
* in the next 5 years there will be more losers than winners. The number of acquirees will go up and the number of acquirers will go down. There will be losers.
* dilemma: the value of the winners will be equal to the aggregate of the segment today. Overall there will be more winnings than losings.
In the Q&A he was asked about incumbents versus newer entrants. His answer, loosely transcribed: "The value of cash flow to incumbents isn't obvious --- if we tighten the market, those who have access to capital have the advantage. . . . we'll see radical changes. . . incumbents with assets, who get their arms around the concept of providing services, will become transport. . . winners will be those with cash-flows plus newer advanced networking, like Qwest, Williams, Level3. . ."
And more specific to Cisco versus Juniper, he gave the metaphor of buying a car. Would you rather buy from a guy whose selling point was that he had a vast number of models and a vast army of repair persons ready to make any repairs or from one who had a couple models with a growing number of extremely happy customers who were coming back for more?
In the carrier space I think the answer is obvious.
Later in the day, after the keynote, I went to two more sessions. The one on optical components was extremely well-attended --- I'd guess 400 or 500 persons in the audience, a large number for an individual session --- and the one "take-away" is that there is huge room for innovation in the packaging space. It's still as much an art as science and there aren't enough specialists to go around.
The last session I attended was, "So you Want to Start a Company," and the two VCs on the panel named fiber optics, and specifically components, as their number one space for investing. The other spaces mentioned were storage and wireless mobile. As the Internet grows we'll have increasing demands for 40 gig systems, increasing demands for mobility and increasing demands for storage.
Pat |
