Jack --
I've just returned from two days in the Silicon Valley and I'm not ready to add to JDSU yet. If they lay off more people and have to write-down good-will, I'm not sure how the market will respond. Long term these actions will be healthy, but WS doesn't care much about anything beyond the next quarter.
It's disconcerting to read all the sensational articles proclaiming there's a "glut of fiber." First of all, it's not news, and secondly, it's misleading. There's so much fiber in the ground because it costs little more to lay ten times more than you need as not to. The big expense lies in lighting it and that's in part what will re-ignite the industry. There are many other factors the journalists leave out. How much of that fiber is outdated? How much is in North America? What's the market beyond NA? How big is the market for lighting the fiber? How big is the market for enabling the last mile? What has to be done before Metro can take off? What has to be done before Ultra Long-Haul can take off? What are the cost savings to carriers in both cases?
Looking at Wall Street and the financial press, I feel as though the blind are leading the blind. The current telecom "nuclear winter" was not propogated by fiber barons. It was a convergence of many factors:
* FCC rulings that made it impossible for incumbents to upgrade their systems without sharing with competitive carriers. This led to the formation of dozens (scores) of upstarts who promised what the incumbents couldn't/wouldn't: quick high-speed connections. Did the incumbents know the small guys would all run out of money? Did they know they'd be able to wait them out while they played a game of "chicken" with the FCC? Probably so, but the end result is the situation we're in: the ankle-biters are dead and the incumbents can build their networks with little competition to spur them to speed up the process.
* the dot.com bubble brought to us by the greed and irresponsibility of venture capitalists and investment bankers. (Some are currently being hung on their own petards.) They brought companies public that never should have been allowed to cross the street alone let alone be given blank checks, and when their stock prices went up, analysts, like Merrill Lynch's Mary Meeker, touted them to insane heights.
* easy money that spurred a fiber-optics-components gold-rush, that led to vendors over-ordering and being caught with their drawers down when the money ran out and orders dried up.
* slow reaction by the Fed last fall when the signs of a slow-down were well advanced. The Fed should have acted sooner and consequently what might have been a telecom-related hiccough turned into a major illness for the entire economy.
If Wall Street wants to crucify someone in order to appease its conscience, I suggest they start by looking inside its own "houses."
"Fiber barons" built new networks because the incumbents wouldn't/couldn't. Wall Street provided the funds. And when the bubble started to expand, they did everything in their power to keep it going.
Now that the bubble has burst, the incumbents will upgrade their networks at a more rational pace. First they'll scoop up some of the dead bodies, then upgrade those areas that will enable a quick ROI, and finally when advanced technologies are ready (ULH and all-optical switching), they'll proceed to develop what in the end will be more cost-efficient networks.
I would keep in mind that the surviving carriers are the incumbents. These are the folks sitting on copper. And to that end I'd bet on xDSL playing a significant role in the last mile. I'd also bet on DWDM in the Metro and on OC-768/40gig systems being pushed out a couple years.
If you really want to benefit from the current debacle, find those companies with good technologies and plenty of cash, and watch for the first sign that carriers are upping their spending. That's when you'll wnat to step up to the plate.
By the time capacity has been trimmed to within an inch of its life and demand begins to pick up, JDSU will once again be a no-brainer.
Until that happens, I'll keep scrubbing tile and painting everything within reach.
Pat |
