OT re telecom: good post.
Last year, when I was buying WCOM, I thought the new telecom markets were not going to end up as commodities. Now, it looks like they are, and are starting life with a glut, so even the first-to-market don't get even temporarily-high margins. The hard part of investing in telecom is figuring out who has barriars-to-entry. Looks to me like the equips are better bets.
I'm thinking now that QCOM, JDSU, CSCO, TXN, NTAP, EMC are better bets than any service provider (even the RBOCs, who will collapse when their monopoly on last-mile is finally broken). When cable and 3G wireless (fixed and mobile) are built out, the RBOCs will go the way of the CLECs. Those dinosaurs are incapable of surviving in a truly competitive market.
For the next 3 years, only wireless and last-mile are going to provide any profits in telecom. Longhaul data is now (and will be till 2004 at the earliest)in glut/near-zero margins. With current overcapacity and wave-division technology, longhaul glass may be in overcapacity forever.
I will probably stand aside till 2002 or later, in this sector. I think the process of destroying capital in telecom has only just begun, and there is still an immense amount of pain in front of us. Before it is over, 100-200B in debt will be written off by N. American and European telcos/telco equips, and a lot more companies need to disappear. It's going to be an agonizingly slow process, lots of companies and investors hanging on and doing stop-gap measures over and over before giving up. When you see WCOM still (still!) adding massive amounts of debt, it's a sign things haven't hit bottom yet. The sector won't bottom until access to debt and equity capital is totally shut off, and we see who can survive just on their cash flows and cash.
I'd give even odds that the telecom industry goes the way of the California electricity market: a disastrously failed deregulation plan is followed by a public bailout and reregulation. The government can't let companies the size of T fail. It's really sickening the way stupid decisions by corporate and govenment decision-makers gets fixed by handing the tax-payer a huge bill. |
