LU exec warns: Could spell a little trouble:
(I say if ya can't say something nice keep ya mouth shut!! dealie)
Thursday December 7, 12:02 am Eastern Time
Lucent exec warns of industry sales/capex imbalance
HONG KONG, Dec 7 (Reuters) - Exploding data traffic over the world's communications networks is forcing carriers to spend but is not generating commensurate gains in revenue or profits, creating an unresolved imbalance for the telecoms industry, the international chief of the world's largest networking equipment firm warned on Thursday.
``As an industry, we're spending what we need to spend to manage the traffic, but we're not getting the revenues coming in,'' said Mike Butcher, president of international operations at Lucent Technologies Inc (NYSE:LU - news), whose stock has been among the most heavily damaged in this year's downturn in tech and telecoms shares.
Despite what are expected to be 12 percent compounded annual revenue growth rates for global telecoms service providers through 2003, opportunities to tap debt and equity markets -- so generous to the industry over the past five years -- have evaporated in recent months.
``This debt and equity feast to famine clearly has occurred, and in the next year ahead, I think it will become painfully obvious, if you talk to a number of new service providers in the world, they are having real trouble raising the capital they need to move forward,'' Butcher told an industry conference.
``The business model is under attack,'' he added in a brief interview following his speech.
Lucent, which makes its money selling equipment to the world's communications firms, has seen its stock plunge 82 percent from a 52-week high of US$84.19, to close on Wednesday at US$15.125 a share, as it has slashed profit forecasts and fired its chairman.
Worldwide, voice traffic now accounts for 55 percent of carrier revenue, and will still bring in 47 percent of sales in 2003. However, by then, data will hog 90 percent of carriers' network capacity, Butcher said.
Service providers are still spending to meet that demand, and capital expenditure globally is expected to grow at 16 percent a year -- faster than revenue growth -- to US$310 billion in 2003, Butcher said.
Revenue for service providers, which will total US$1 trillion this year, should reach US$1.2 trillion in 2003, he said.
At the root of the industry's current dilemma is the rapid advent of intense competition that has come with telecoms deregulation around the world, he said. Lucent itself was once a part of former U.S. monopoly AT&T (NYSE:T - news).
To bridge the gap between revenue growth and capital expenditure demands, Butcher said the industry must find new ways to generate revenue, reevaluate business models and cut expenses. He also said the newly stingy capital markets will prevent some would-be competitors from entering the fray.
``We maybe are in trouble -- the markets are telling us we are,'' Butcher said, although he said there are worse places to be than in a US$1 trillion industry growing at 12 percent a year. |
