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To: J Fieb who wrote (1027)	10/30/2000 7:08:15 AM
From: Thai Chung	Respond to of 2260

October 30, 2000 Despite Nortel's Slow Sales, Researcher Predicts Surges in Fiber-Optics Spending By MARK HEINZL Staff Reporter of THE WALL STREET JOURNAL Networking-industry research firm Ryan Hankin Kent Inc. sharply raised its forecast for North American spending on fiber-optic data-transport equipment, a move that could help ease industry concerns caused by weaker-than-expected optical equipment sales reported by Nortel Networks Corp. Nortel shares plummeted 29% last Wednesday, erasing $55 billion of market capitalization, after the Brampton, Ontario, telecommunications-equipment maker revealed optical-equipment sales fell in the third quarter from the second quarter and missed expectations by hundreds of millions of dollars. The news triggered a sell-off of shares of many companies involved in optical networking, as fears of an industry slowdown gripped investors. In a study to be released Monday, San Francisco-based RHK said it expects industry spending of $20.6 billion this year to rise 42% to $29.3 billion in 2001. A year ago, RHK had forecast spending of $19.4 billion for 2001. RHK also raised its spending forecast for following years, and predicts spending will reach $45.4 billion in 2004. The study puts Nortel in the lead for sales of optical-transport equipment in North America, with a 38% share of market this year, up from 29% last year. Much of Nortel's gains came at the expense of rival Lucent Technologies Inc., Murray Hill, N.J., the study shows. "We don't see any slowdown in the market," said Anil Khatod, Nortel's president of global Internet solutions. "Nortel continues to grow faster than the market" in North America, and more so in Europe, Asia and Latin America, he said. After announcing its third-quarter results, Nortel said its optical sales were constrained partly because some customers previously had deliberately built up inventories amid industry shortages, and spent the third quarter working the inventories down. "This inventory workout is already behind us," Mr. Khatod said. On Thursday, optical-components maker JDS Uniphase Corp., based in San Jose., Calif., and Nepean, Ontario, provided some relief to optical-industry investors with strong fiscal first-quarter results and an upbeat outlook. RHK arrives at its spending forecasts by discussing spending plans with telecommunications carriers, who purchase optical equipment, and the companies that sell it. Much of the increase in forecast spending is due to "new carriers that didn't exist 12 months ago," RHK Director of optical networks Dana Cooperson said. Some analysts doubt carriers will increase spending on the order RHK expects and cite fast-growing communications capacity in long-haul networks and uncertain demand. Though carriers could decide to restrain general spending, "if anything is going to suffer it's not going to be optical," Ms. Cooperson said, since optical networking allows carriers to produce the most communications capacity at the lowest cost. Still, the large number of established companies and newcomers in the optical-carrier industry means there is likely to be "some kind of consolidation," she added. Write to Mark Heinzl at mark.heinzl@wsj.com