Michael,
Well to be honest, the first signal that this comment is bullpucky is that "BAR" is an ASND underwriter and is clearly pursuing their own interest. That's the first item I'd take to the bank.
Second, this story has a fundamental spin to argue that sales of ATM switches will be stimulated by the increase in layer 1 media (fiber). This is the main focus of the story and of ASND's push this year. ASND has taken a beating in the RAS market due to increased focus by Cisco, 3Com and Bay and with it eroding margins. Since this was ASND's traditional market they need to seek other businesses where they can succeed and ATM is the next closest thing in their bag of tricks. If they don't succeed here then....well.....it gets ugly.
Third, BARS argues that because there a glut of fiber being installed that this will require hardware on the ends. That's like arguing that if the farmer grows twice as much corn as he needs, he'll need twice as many trucks to take it to the market. Of course this assumes that the market NEEDs the corn. If consumers aren't eating more corn, then no more trucks are needed to deliver it. The result is that the extra corn the farmer grew will sit and rot in the field. The point is, that lower cost access and killer high bandwidth applications need to continue to push demand for more bandwidth. That is consumers need to demand more corn in order to justify delivering it to the market.
Now, this is occurring already to some extent, but this needs to continue in order to get carriers to buy now and continue buying into the future. In fact, it appears to me that most carriers are becoming a bit more methodical - they want to limit over extending themselves on expenses. Witness what WCOM did with CIEN recently. RBOC orders were off last quarter. Asia will reduce consumption and build-out. So, putting more fiber in the ground doesn't IMO mean more equipment purchases. Rather carriers need to feel the need to install to meet demand for higher bandwidth.
Key leading indicators here I think are uptake of xDSL and cable modem technology, new killer interactive applications, multiservice apps on IP or ISP's getting into the multiservice business... and other like "stuff" <--technical term.
So, I wouldn't read too much into the BARS story - although it was an interesting perspective which we should use as just another input. Some will give it more weight than others.
Gary |
