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Technology Stocks : SDLI - JDSU transition -- Ignore unavailable to you. Want to Upgrade?

To: John Carragher who wrote (655)	3/10/2001 9:22:24 AM
From: Jack Hartmann	Read Replies (2) \| Respond to of 3294

. One million net new fiber miles will be added in 2001 and 719,532 in 2002, which certainly won't reverse the overcapacity problem. It's also bad news for the equipment suppliers, who will see sales decline as new deployment of fiber ramps down. There a figure I haven't seen. A decrease in fiber miles laid. Jack

To: John Carragher who wrote (655)	3/10/2001 6:31:38 PM
From: pat mudge	Read Replies (2) \| Respond to of 3294

"Every year, they put in a third more [capacity] than they needed to satisfy demand," Kalla maintains. The pace of additions will slow this year and next -- but it's still hitting the market. One million net new fiber miles will be added in 2001 and 719,532 in 2002, which certainly won't reverse the overcapacity problem. It's also bad news for the equipment suppliers, who will see sales decline as new deployment of fiber ramps down. Laying fiber and lighting it are two different issues. JDSU sells the components for both. There are some passives involved as dark fiber is laid and that's where we're seeing a lag. Conversely, we're seeing strength in actives b/c fiber continues to be lit. Further evidence of falling prices comes from the spot market for bandwidth. When supply is tight, companies will pay more when they need to buy short-term bandwidth contracts at the last minute. Meanwhile, customers that enter long-term contracts get a price break. It's akin to purchasing an airline ticket. If you buy the ticket last minute, the price is often much higher than if you buy it a month or two in advance. But in the saturated broadband market we're in today, there's no incentive for companies to buy long-term contracts. This works both ways. Just like with oil or computer chips, when there's a period of over-capacity, production slows and by the time demand picks up, there isn't enough capacity to meet it, so prices sky-rocket once more. And little wonder. Six months ago, a short-term contract to send voice or data over one mile of fiber was about penny per month. The price has since fallen to six-tenths of a cent. (That's the equivalent of 50 cents a day for a dedicated line between New York and Los Angeles.) Making matters worse for the carriers, as customers move from long- to short-term contracts, selling costs go up, biting deeper into their margins. Here Kalla is right. Though what she fails to recognize is that anyone who wants to compete has to have multi-channel DWDM systems in order to bring the costs down. Spending money to upgrade is the only way any carrier can survive. This is why CORV, CIEN, JNPR, SCMR and JDSU are such compelling investments. Their products allow old carriers to upgrade what's already there and new carriers to provision previously unlit fiber. Judging by the article, Ms. Kallas is a genius in hindsight. If her prognosis going forward is to sell all the companies she "covers", history will judge her accordingly. Pat