To: Kenneth E. Phillipps who wrote (9752 ) 2/15/2001 10:52:07 PM From: pat mudge Read Replies (2) | Respond to In re-reading notes from last earnings's CC, I've highlighted clues to current warning.Inventories --- 80 days, higher than 60-70; some wanted to deploy early in 1Q. [Did they postpone further?] By 2Q will return to normal range. Less visibility in entire sector b/c of economy. Time perspective. 2001 needs fed reserve to take action. [Roth recognizing seriousness of slowdown?] Prudent to leave guidance at 30% for year. Expect to see acceleration in second half. First quarter estimate at $8.1B, 0.16. eps. Packet transition strategy exceeds expectations. [Faster slowdown in circuit?] 150% y/y growth.Impacted by CLEC pressures. [NT not immune.] Our focus is fiber optic-based and we’ll see continued growth. · moving to bandwidth intensive infrastructure away from processing infrastructure. [Clue that FO isn't problem.]A: BtoB was one. Order flow is traditional. [Not strong guidance.]Did see slow-down in CLEC activity. 3G --- expect deployment to be in 4Q 2001, with volume in Q1 2002. Some revenue at end of year. [Again, weak guidance.]Actually seeing over 25% growth. (France, Italy and Germany). Yes, this is industry growth and also NT. [No mention of NA.] Optical inventory is behind us. Most was noise level. We came in at guidance --- at top end. We don’t give that information. (I missed question). Strategy is to build out all-photonic network. [CLECs has to be one area making an impact.] [ discusses particular contract areas. . .]Focus is to take circuit to packets. By end of year we’ll be at 40%. [This is biggest clue. He's in effect saying, "Let's not talk about circuit but focus on where we see growth: packets."] Have excellent velocity with customers. We have the only full solution from circuit to packet. We’ll gain velocity against others. As customers begin to deploy IP services, that’s where you see the curve.A: We see economy which slowed from middle of last year. We see it increasing in second half. We have an ability to go after a high percentage of growth potential. We see end demand not going away. Capital markets have tightened. CLECs seeing it. Many customers are working hard to maintain capital. As markets improve we’ll see change. Customers see low-cost bandwidth can save costs. So the demand continues. [Here he lays it out. No holds barred. Slow first half; better second half.] See stronger growth in metro, but no granularity. Can’t comment on particular systems. [Again, focuses on metro to the exclusion of long haul.]We gain share in metro. Each of our leadership categories complements the others. Quite confident we’ll continue to gain share. [Yet again --- metro is strong. . .]
