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Technology Stocks : LAST MILE TECHNOLOGIES - Let's Discuss Them Here
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To: Link Lady who wrote (12142)2/15/2002 2:50:38 PM
From: Raymond Duray  Read Replies (1) of 12823
 
Any idea what the optical wavelength sales refer to?

Yes, what this refers to is the ability of LVLT to sell a portion of the capacity of the fiber strand. This is due to the advances in DWDM, dense wavelength division multiplexing.

They are slicing the fiber into multiple data streams, and selling them individually.

Beware of discussions of IRUs or SLAs. Both of these agreements have been abused by the carriers to inflate current revenues by recognizing full contract income in the reporting period the contracts are signed, rather than the more conservative accounting treatment that would have the income applied to the P & L as the income is actually accrued.

Another huge problem with IRUs and SLAs is that the ones that were written a couple of years ago are largely being abandoned, with the carriers being forced to make lease-sales for periods of months rather than years.

This is the result of the catastrophic loss of pricing power in the long haul fiber optic sector.

Level 3 thought they were clever, and thought they could sustain a profitable model in the face of a market where the basic commodity sold, bandwidth, was able to generate 50-60% less revenue per unit. In the event, prices have crashed faster and farther than Crowe & Co. anticipated. Leading to the precarious situation the company finds itself in.

Unfortunately for Crowe, Winnick of GX and others, there were no real barriers to entry to over-building the long haul fiber networks. The economics collapsed as vastly too great a capacity was installed, and the demand side failed to keep up.

-Ray
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