Greg,
I view NT as sort of an "old world" company, about as in tune with things as AT&T (well, okay---not that extreme). So, I would expect fairly limited and temporary collateral damage, by the same reasoning that a forward warning by AT&T would hardly cause a ripple among the vast majority of the NDX 100 companies. They are different companies in different worlds.
I suspect there will be a big gap down in NT at the open, with temporary collateral damage extending into the $SOX. Given the recent strength in the $SOX and the money flowing in there, I'd say that this might well simply provide good entries into the companies in that sector, and the sector (and $COMPX in general) will continue to rally and simply shake off NT's bad news fairly easily. In other words, greed will overcome fear, and any sort of bargain prices in the $SOX and opticals will not be a sell signal, but will instead be pounced on.
And I think it ought to be kept in mind that there is a very important counterbalance to NT's woes, and that is CIEN. Partly because of this, I'd also anticipate (again for the same reasons as above) that the optical networking sector will suffer little lasting collateral damage, and will instead likely rally. An increasingly optimistic market will tend to shrug off bad news, and focus on good. And the benefactors of NT's bad fortune will, I think, be perceived to be CIEN, SCMR, and the rest.
That said, all these issues will one day come back to haunt this market, unless there's dramatic improvement in fundamental economics.
JMVHO.......
WS |
