Tcd,
This looks a lot like the previous quarterly report. Basically, they are saying that Nortel did not promise them as much business in the next year as they were hoping for. In fact, there may have been a small decline in the promised business. Furthermore, Nortel (and others) must be asking for a steep price decrease.
Obviously, as people have said, this was known by several folks who apparently bailed out in a big way. This caused the initial drop and then when it became public, everyone else bailed.
As these products have long lead times, Nortel has to be as accurate as possible in its forecasts. Still, I would imagine that there is room for upside from the contracted quantities if business turns out to be better than expected.
The bad news is that the Nortel business seems to be flat/down for the next year and SPCT's high fixed costs will hurt profitability. Another negative factor is that Nortel had a large hand in the US PCS/Digital Cellular buildout. With that buildout substantially over, it is no surprise that Nortel cannot forecast increased demand. Hopefully, the rest of the world's demand combined with US upgrades will spur the market in 1999 and beyond.
I should have thought more about these factors earlier, but as they say, live and learn.
Richard |
