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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Cactus Jack who wrote (34614)	3/25/2001 10:46:01 AM
From: im a survivor	Respond to of 65232

More positive press for FO sector. I've also noticed quite a few "experts" saying folks not taking advantage of buying jdsu at current levels will regret it down the road. Who know's...jdsu could get cheaper, but I do agree....long term, they are far higher then current valuation. JMO Dow Jones Newswires Slowdown Doesn't Damp Enthusiasm In Optics Industry By JOHNATHAN BURNS Of DOW JONES NEWSWIRES ANAHEIM, Calif. -- Neither the NCAA basketball tournament nor an extended market downturn could steal the lightning from the folks who catch light in fiber optic wires. There was, after all, very little empty space in Anaheim, Calif., at the Optical Fiber Conference, which ended Thursday - the same day part of the Sweet Sixteen came to town. Unlike a game, however, players in the fiber optic sector know there is no end to the competition, only short breathers. Despite plummeting carrier spending and stock prices, industry executives and investors realize optics is only in its infancy and will continue to grow. "All information is going digital, and we're building the new global digital network to handle that information," said Michael Cohen, financial analyst with Alpha Analytics Investment Group. Industry observers believe U.S. telecommunications carriers may spend 9% less on telecommunications equipment this year than last year, but a greater share of the capital that is spent is expected to go to optical gear. "They're obviously going to spend a good chunk of capital," JDS Uniphase Corp. (JDSU) Chief Operating Officer Jay Abbe told Dow Jones Newswires. "There's just no doubt everyone's gotten a bit more cautious." The overall slowdown in the U.S. economy, coupled with a lack of confidence in the financial markets, has put a pinch in spending by startup phone companies, which are having a hard time raising funds. Incumbent phone companies have reduced their own spending, since they are less concerned about new entrants. But telecommunications spending could return quickly, many in Anaheim said. "The honest answer is, we don't know," Abbe said. "It could be strong again in the second half or remain sluggish. Our customers tend to be positive about the second half of the year." The slowdown in spending has put the brakes on runaway valuations throughout the industry. Systems makers such as Nortel Networks Corp. (NT) have lowered estimates, which has had a domino effect on component makers such as JDS Uniphase and Corning Inc. (GLW). Those systems makers will work through excess inventories of optical components they bought last year when there was a shortage of parts. "We suspect we'll see inventory adjustments in the next quarter a bit," Abbe said. The conditions have put a chink in the armor of the optical companies, which had withstood a selloff of technology stocks for most of last year. Recently, many companies have traded at near their 52-week lows. It will take a boost in confidence to re-ignite telecommunications spending, said Corning Chief Executive John Loose. "I think one thing we need is a little liquidity in the capital markets," he said. "We also need a little psychological wind behind our backs - which is why I support (the proposed) income tax cut." Most in the industry agree there will be a continuing thirst for bandwidth. Loose and others believe the demand for bandwidth will increase 100% annually for the next 10 to 15 years. "I think that may be conservative," Loose said. The only way carriers have to deliver that bandwidth is to upgrade their networks with optics. Unfortunately for carriers, such network construction is expensive. Fiber transmission requires a number of moving parts, such as lasers, fiber, filters and modulators. And increasing the capacity along those fibers requires more powerful gear. Carriers are caught in the no-win proposition of having to pay more to provide services to customers, but being unable to charge enough to recoup their costs quickly. The optical community has begun to respond by talking about increasing its focus on manufacturing processes, which would lower the costs of products to carriers. "I think as the carrier spending goes down, you have to concentrate on costs," said Rohit Sharma, chief technology officer of optical systems maker ONI Systems Inc. (ONI). "The industry needs to grow up and focus more on cost reduction." Ironically, the economic slowdown may be just the spark for such new thinking.