I would say they have excellent position to be a market leader. But: the ultimate winner will be the low cost leader, not the technology leader. This is a 180 culture change, at least for most of the company.
Why would it be the low cost leader? JDS Uniphase may not be the low cost leader, but they are the least likely optical component company to disappear. The system guys won't want to do business with someone who won't be around 6 months from now, right? Who would you say are JDSU's competitors? Nortel did make optical components, but aren't they pulling out? Corning had plans, where are they? Lucent spun their components business off.
Banc of America's Chris Crespi exposed! (Crossposted from the other JDSU thread) Crespi has done a 180 on the telecom sector in a 2 week period. I wish I could believe Crespi's optimistic statements in the Light Reading article on telecom upgrades, but unfortunately they are in direct opposition to what he said at the OFC 2002 Conference in Anaheim just two weeks ago. I attended the Commercial Technology Program session on market and investing conditions where Crespi said that there would be no recovery until at least 2004. He even said that it is laughable when analysts on CNBC talk about a second half recovery for telecom. He indicated that the data just don't support such a recovery. He presented lots of data supporting this view. His presentation can be found on the OFC-online website.
Look a recovery in this sector isn't some magical and mystical thing. The telecom companies are having trouble making a profit selling bandwidth. Many of them have lots of debt and will probably file for chp11 to protect themselves.
If start-up carriers file for chp7 and liquidate, lots of used equipment will hit the market, that is going to hurt JDSU's sales. So to say that 2 quarters from now will begin an uptrend just doesn't make sense when carriers like williams or XO or global crossing or any of the others haven't figured out whether it's chp7 or chp11 to reorganize and continue operating their networks. The second option wouldn't be all that great because that would continue to put pressure on bandwidth prices as these companies will now have no debt to pay interest on.
Willaims, Global Crossing and others pay hundreds of millions in interest. Over 500-1000 billion a year. That raises your costs quite substantially, especially when it's 1/3 of your revenues. That being said, I'm not sure if components and gear from one network could be sold and installed in another?
As long as there is an over supply of bandwidth and companies are focused on profits (and have to fix their balance sheets), CapEx spending will remain weak. When the telecom finds an equilibrium and is able to produce profits is beyond me. I couldn't see this lastly more than 12 months. I think we are getting close to the clean up period. Where carriers like Williams disappear. I couldn't see them still around 12 months from now, but then again, I haven't followed them that closely.
Any thoughts?
Just think, in Japan they would merge Willaims with Verizon and Level3 with SBC. No wonder they've been in the crapper for so long. You have to fix the industry and get to a healthy level of competition and supply and demand. |
