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

To: sam_o who wrote (1396)	5/4/2001 1:31:39 AM
From: pat mudge	Read Replies (1) \| Respond to of 3294

I just got home tonight so will do a quick report and then be more thorough later. From today's panel on "The telecom food chain:" Q: What went wrong? How did we get here? A: Over funding. Carriers and systems providers spent on trial equipment, then their manufacturing partners went to component companies and ordered based on everyone gaining 10% of their sector. Then capital markets closed down and the second tier guys's spending evaporated. From Q4 to Q1 down 80% in the non-incumbent space Traffic growth continues at healthy levels. 85 to 100% bit-rate growth every 12 months. Still no major slow-down in traffic. Once through bubble, optical will return. Silver lining: We're still in the early days. Lots of room for manufacturing improvements. Lots of room to improve next-generation technologies. Three areas to look at in understanding downturn: Carrier capex, enterprise IT spending and consumer broadband access. The second two did not have the same severe bubble. Q: Capex this year and next? A: Enterprise still here, but more information now. Starting their spending plans. Will track economy. Service providers have healthy traffic growth. But revenue growth is in low single digits. We're now in the early stages of consolidation. A reduced number of providers will lead to price stability. Capex is down 8, 9, 10% for the year, perhaps down 15% in NA. M&A will fluctuate spending. Bandwidth growth will take up slack. Catch up at mid-pt of next year. Stocks in trading range till end of year. Enterprise is the place to be. Extreme Networks called April the bottom. Willhout: We don't know where capex is being spent precisely. It's still possible a bigger percentage is going to fiber optics. Incumbents represent 90% of capex. Huge focus on return of capital. Making decisions more quickly. They'll spend if 1) there are efficiencies and 2) there is a return of capital. AMCC and PMCS seeing 50% of design wins for the metro. Q: How much inventory is out there? A: Extreme Net says demand will pick up next month. This will take 1 or 2 months. CSCO and NT had excess into 12 and 18 months but they've written it off. They still have 6 to 9 months to work through. [Re: CSCO write-off, they had 4.1B and wrote off 2.5B, with the price decline they're writing 1.2 to 1.3B down to zero.] Cable modem inventories will be over in 2 months, set-top boxes sooner. CSCO not a factor in optical component space. They aren't a 10% customer for anyone. Q: Lead times in components? A: Passives are now 3 to 4 weeks. Transponders and transmitters still have long lead times. No pricing pressures on OC-192. Silicon germanium still has long lead times. Q: What's positive? A: Anything where elec is combined with optical in same product --- smaller, cheaper, faster. Voice-over --- Sonus is doing well. Core of the metro and network switching also healthy. Q: Favorite stocks and those you think are sleepers? A: "Must owns:" TUNE (from semi guy), ONIS, CORV (sleeper), Agere, Finisar, CSCO (the large cap that will lead us out), and from Michael Nieberg, CS and Cosine (sleeper). ALAO had a good presentation. Those notes later. Overall, the atmosphere was guardedly optimistic. Any sign that orders are improving will lead to a stampede. Pat