Good opportunity for COSN:
Network Spending by Businesses Seen Rebounding
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Business Risk vs. Market Risk: Why Should You Care? - (Yahoo! Finance Vision)
By Jim Christie
SAN FRANCISCO (Reuters) - After months of spending cuts, North American companies are getting ready to ramp up purchases of communications equipment for wide-area networks to link far-flung offices and other facilities, according to a survey released by Infonetics Research Inc. on Friday.
``There has been a lot trimming of fat and realigning, and now people across industries are looking at how to deploy networks to reduce operating costs,'' Jeff Wilson, executive director of the San Jose, California, market research firm, said Friday.
That would be a welcome trend for network gear makers, who struggled last year as the Internet boom went bust and a global telecom downturn took hold. The American Stock Exchange Networking Index (^NWX - news) closed on Friday at 319.72, off 77 percent from its all-time high of 1,401.26 on Sept. 1, 2000.
Longer-term prospects for gear makers, however, are strong as companies raise spending on wide-area networks to boost productivity and conduct more commerce online, Wilson said.
Wide area networks cover widespread geographic areas and connect distant offices and mobile work forces.
Based on a recent survey, Infonetics forecast that 95 percent of large U.S. and Canadian companies -- those with more than 1,000 employees -- in 2006 will have wide-area networks, up from 86 percent in 2001.
Additionally, 76 percent of mid-sized businesses with work forces of 101 to 1,000 employees will have wide-area networks in 2006, up from 55 percent in 2001, Infonetics said.
Infonetics forecast that 42 percent of small businesses with 20 to 100 employees in 2006 will have such networks, up from 20 percent last year.
``Enterprise'' customers including corporations, large institutions and government agencies will raise spending on network gear faster than telecom carriers and network service providers, Wilson said.
``If you sell directly to enterprise customers, you will do much better than if you sell to carriers who sell to enterprise customers,'' Wilson said.
Wilson noted, however, that carriers and service providers will reap business as many small and mid-sized companies outsource network services.
Most gear makers expect the near-term to be difficult. Some, however, have said that sales, which plunged last year, may be stabilizing.
Analysts say company guidance of essentially flat earnings for the current quarter may mean that the slump has bottomed out and gear makers are in position for modest gains in the second half.
John Chambers, chief executive of Cisco Systems Inc. (Nasdaq:CSCO - news), the biggest maker of equipment that powers the Internet, earlier this month gave networking stocks a lift when he said Cisco's December orders met expectations and customer budgets, while conservative, could rise.
Another hopeful sign came from Extreme Networks Inc. (Nasdaq:EXTR - news), which makes gear for enterprise, service-provider and metropolitan-area networks.
Extreme this week said that 34 percent of revenues in its fiscal second-quarter ended Dec. 31 came from customers in North America, down 54 percent from the same quarter a year ago but up from 31 percent in the first quarter.
``We are optimistic that the worst of the industry's downturn is behind us,'' Extreme Chief Executive Gordon Stitt said. ``I think we'll see some slight improvement in the first half of the year and a stronger turnaround in the second half of the calendar year.''
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