Nortel CEO sees no surge in telecoms spending
Monday November 17, 3:34 pm ET
By Jeffrey Hodgson
(Figures in U.S. dollars unless noted)
TORONTO, Nov 17 (Reuters) - Nortel Networks Corp. chief executive Frank Dunn said on Monday he does not expect capital spending by telecom companies to return to the boom levels seen in 1999 and 2000.
The head of the Brampton, Ontario-based telecom equipment maker, one of the world's largest, said the surge in demand which sent its sales to a record $30 billion in 2000 was simply not sustainable.
"Everybody is looking for this big capital spending to start again. Well it's not going to happen. What was spent in 1999-2000 was unaffordable. Carriers were running to some 20 to 22 percent of their revenue in capex spending," Dunn told communications conference in New York.
"There is no business model that could afford that kind of spending. So we're back down to the low teens. And, historically, that's where this industry has always been. And that's where it should be."
Nortel, and rivals Lucent Technologies Inc. of France, saw demand for their gear slide in recent years after over-investment during the Internet bubble left phone companies with too much capacity.
Shares of the telecom equipment makers have rebounded during the past year on hopes the worst is over and growth will resume. But Dunn said expectations for spending on telecom equipment should be modest.
"They're not going to be big spends.
They're going to be graceful spends, but on new technologies: on packet, on broadband, on dynamic optical, on a multi-service engine.
And it will go away from the traditional spends," he said.
"So I don't expect to see capital expenditures go up dramatically.
What I expect to see is a dramatic shift in spending patterns."
The chief executive also reiterated Nortel's forecast that it will earn a profit for the full year.
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