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To: John Koligman who wrote (7796)	9/27/2000 4:47:38 PM
From: Jacob Snyder	Respond to of 11568

re: the article: This is a classic case of investors who have a time horizon measured in years (not months), being able to take advantage of those who don't. My guess is that telecom investment will peak next year, and the ratio of investment/revenue is peaking now. That is, the investment is going to start producing big revenue sooner than the Street thinks. It may be that a lack of financing for necessary infrastructure, leads to deals in wireless next year. That is, the companies with the licenses and customers get bought by the big companies with access to financing. Certainly, Ebbers has said wireless is too expensive now.

To: John Koligman who wrote (7796)	9/27/2000 6:09:20 PM
From: MGV	Read Replies (2) \| Respond to of 11568

Thanks for posting the article and thanks to Jason for providing good material for fruitful discussion. Call me crazy but I find bullish nuggets in the Cnet article. I pasted the salient parts below. What do you all think? I think you can make a case that the current scenario: one in which capital markets are so much tighter than they were over the past 24 months - the current scenario favors the strongest, defined in terms of cash flow. Point 1 it's critical for any company that wishes to remain competitive to upgrade to the latest Net-based, high-bandwidth technology from the likes of Cisco Systems, Juniper Networks, Nortel Networks and Sycamore Networks, among a slew of others, that will allow it to handle massive amounts of voice and data traffic more cheaply than old systems did, according to analysts. Any company that stays with yesterday's technology will find themselves written out of technology's history books, they say. Point 2 But the investment needed to keep up means tens of billions of dollars. In the past several years, access to capital markets has been relatively easy and cheap, leading to many network start-ups funded by venture capital and IPO cash. That easy money is now drying up. Moreover, analysts say that the largest telecommunications players will likely issue something like $75 billion in new stock by the end of 2001, driving out demand for smaller, riskier companies. Point 3 Bulling ahead The biggest companies in the industry say they're comfortable with their investment plans. Even from the depths of stock lows, with investors questioning many of the companies' strategies, executives say it is critical that they invest in the fastest-growing businesses such as data and wireless. AT&T, for example, says it invested $13.5 billion in 1999, and is on track to invest between $13 billion and $14 billion this year. The company's total revenues will be no less than last year's, a spokesman said. "We're not trending as the (pessimism) is suggesting," said spokesman David Caouette. The company has nevertheless scaled back its profit expectations, based on disappointments in its business services unit and falling returns in the long-distance business. Verizon Communications says it too is very comfortable with its investments, noting that revenues in its data services business are growing by 30 percent a year. The company is investing a total of $18 billion in its infrastructure this year. "We've invested in the fastest-growing areas in communications," said spokesman Dave Frail. "We feel pretty good about putting dollars there." Point 4 While the giants are worried about stock price, smaller companies are worried about their very survival. Several younger network companies, such as PSINet and US LEC have seen their share prices tumble after profit warnings and news of financial insecurity. Denver-based ICG Communications has been particularly hit hard, seeing shares fall from almost $40 to below $1, and losing much of its top management as a result. More mergers What can the companies do make it though the dry patch while waiting for the returns and demand to catch up to their investment? More of the same, but it won't be pretty, many analysts say. The market has too many networks for the capital markets to support through a period of low profits. That means more mergers, as struggling small companies sell themselves to the giants or to companies just another rung up on the food chain. The giants themselves will likely be engaged in more merger activity as they try to align themselves best with the New World. Long-distance companies like AT&T and Sprint have seen revenues drop well below early estimates. Sprint is still reeling from the collapse of its merger with WorldCom, while AT&T is reportedly considering mergers and other combinations. "They're already looking into that crystal ball and trying to get the best economies of scale they can," said Eliot Hamilton, senior vice president of research for the Strategis Group. "They can see the handwriting on the wall." Final Point - I think the telco equip companies are at much greater risk here than the strongest telco services companies.