Deshpande sees hope for battered telecom industry
By Peter J. Howe, Boston Globe , 5/16/2002
Gururaj ''Desh'' Deshpande, the chairman and cofounder of Sycamore Networks, said yesterday he thinks the ravaged telecommunications-equipment sector has probably hit bottom - but is likely to stay there for the next 12 to 24 months.
Speaking at a Boston business conference, Deshpande, whose Chelmsford-based company's Wall Street market capitalization has plunged from $40 billion two years ago to under $950 million, said he sees a long period of balance-sheet cleanups and consolidations before the industry begins to bounce back.
''Obviously, it's overinvested,'' Deshpande told attendees at the Association for Corporate Growth annual meeting, where he collected a technology leadership award.
''When do we see the bottom? We may be there, but we may stay there for 12 to 18 months before people start doing things again,'' and it could be ''18 to 24 months before we start seeing growth in the business,'' he said.
Deshpande said he estimates that $1.5 trillion was invested in telecom infrastructure in the last six years globally, or as much in the last three years as historically would have been spent in 15 to 20 years.
While phone and Internet companies struggle to digest massive overinvestments in the late 1990s, Deshpande said, ''The mess that we're in today is not because what we are doing is bad.... The investment [just] got ahead of the business itself.''
Deshpande, whose personal wealth is estimated to have plunged from $7 billion to under $1 billion, joked that ''the best definition I've heard of a genius is: A genius is a crackpot who hit the jackpot.
''A jackpot it is - or a jackpot it was,'' Deshpande said in an apparent reference to his own financial experience. But, he added: ''There are a lot more jackpots to be had'' in telecom and high technology generally.
Desphande, who immigrated to the United States from India in 1973 and went on to found Cascade Communications (now part of Lucent Technologies) and Sycamore, said: ''It's hard to see how the downturn can last in an economy that's so vibrant. The US is an amazing economy. In the macro sense, there is no other economy in the world where the game is played, the winners are allowed to win, and the losers are allowed to lose.''
In the case of the shakeout now underway among telecommunications service providers and equipment makers, Deshpande said that ''this is not something that hasn't happened before'' in industries as diverse as the telegraph, railroads, and automobile manufacturing.
''Things got overdone; things got consolidated; and then you had a few big players who owned the industry,'' Desphande said. He made no comments specifically about Sycamore's plans. While the company's stock has plunged from over $150 in 2000 to $3.47 yesterday, down 18 cents for the day in Nasdaq trading, as of Jan. 26 it reported over $600 million in cash and short-term investments, giving it assets to ride out two or more years of depressed sales or snap up promising start-ups for fire-sale prices.
Asked what he sees as ''the next big thing'' in telecom, Deshpande joked: ''If I knew, I'm not going to tell you.'' But he later added: ''In the long run, I'm very bullish about wireless,'' particularly networks combining wireless access for customers and super-high-capacity fiber-optic long-haul networks.
Peter J. Howe can be reached at howe@globe.com.
This story ran on page E5 of the Boston Globe on 5/16/2002. |
