Frank, Thanks for your lengthy and detailed response. The main thing I got out of it is as follows:
1. You think the analogy to the state and local highway buildout is more appropriate.
2. Telecom equipment can probably continue to function for decades if maintained properly. Incumbent corporations will probably upgrade when they are forced to do so.
This stuff is obviously very complicated. I need to keep it simple in order to try to understand this whole thing. Also, I am not sure how much such detailed knowledge really helps one in trying understanding the big picture. For example, I have read several letters to shareholders recently from telecom equipment CEOs who all say they were completely blindsided by this whole thing.
I just listened to the CEO of Lucent talk about the industry, recorded from the CNBC MarketWeek show. She said the question is when demand returns, not if. She also pointed out that total worldwide spending on telecom equipment and services is estimated to be about 200 billion in 2002. And the host of the show put up a bar chart which showed that north American spending on telecom equipment to be much more stable than one would have expected, given the incredible dive in most of these stocks.
Here is my two cents worth on the big picture:
1. The experts are still trying to figure out what happened in telecom, and by the time they figure it out, the whole thing will be over. This could be years, however. Maybe if we are lucky just one year. Also, I think analysts will probably be most bearish on this sector right at the bottom, and be just a wrong as they were at the top.
2. Human nature is to blame more than anything else for this telecom tragedy. A more detailed explanation involves the convergence of so many things such as the telecom deregulation act, the emergence of the internet, the Y2K replacement buying boom, the Fed chief keeping rates too low because of Y2K fears, the dot com mania and subsequent surplusing of all that used equipment, the recession, Sept. 11, etc. Also, it has been quite a while since the last major boom/bust phase of this sort. Those who do not study history are doomed to repeat it, as they say. Also I think the last mile bottleneck and the special interests of of organizations such as the Motion Picture Association of America are making it difficult to move forward. Regarding the last mile, I am hoping the UWB (Ultra Wide Band wireless technologies for internet access) movement takes off as some are predicting. If bandwidth demand were to greatly increase in the next couple of years, then maybe the industry will soon find a way to fix the business models and other issues that are holding down this sector. Also, I think our bankruptcy system is partly to blame. And lastly, I think our leadership in Washington is doing little to help here. I don't see why we need to subsidize the inefficient airline industry and at the same time let the wheels fall off the train in our telecom sector. We are wasting too much of the worlds oil supply in my opinion, and advances in communications technology could help quite a bit with that.
3. I don't know what to say about telecom equipment stocks here. If anybody knows the answer, please let me know.
I still think the internet is one of the most fantastic inventions ever created. I hope we at least don't have to worry about the analogy to the tulip craze in Holland many years ago. I don't think tulips will ever change the world, but I hope the internet continues to do so in many positive ways.
Thanks again for your insight, and thanks also to Elmatador and Willcousa for their thoughtful replies as well.
John |
