Keith:
If you believe the CIBC numbers, there was as much as 7x over capacity about two years ago. The traffic has grown about 200% since then, and some of that capacity is being removed with the business failures. The magic number that triggers re-investment ranges from 70-100% of over capacity. That's because spending on capex takes about a year, so at 100%/year, you keep one year buffer. The thing is, that is 100% of the installed base, which is a huge amount.
I also forsee the service providers have an incentive to cut their operational costs, which they can only do by 1) not investing much new at all, 2) investing in the latest and greatest to cut op costs. That means getting more commonality, flexibility and reliability in one box, then buying them in bulk to get discount.
So if there is not a recession in the future, we should be at the bottom now or next CY quarter on average. In other words, if the economy picks up enough to shrug off the real estate droop, we are off to the races...albeit at a milder pace than last time. |
