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To: Softechie who wrote (1397)	6/8/2001 3:23:50 AM
From: Softechie	Respond to of 2155

DJ Optical Cos Drop -3: Street Awaits Telco Spending Uptick 30 May 13:19 Last week, ADC Telecommunications Inc. (ADCT) sent a clear signal to Wall Street that demand for fiber optic and broadband connectivity products is not expected to see a quick uptick. The company substantially lowered sales guidance for its ongoing fiscal third quarter and upcoming fourth quarter. UBS Warburg telecommunications equipment analyst Nikos Theodosopoulos noted as much in a morning note Wednesday on Tellabs. "We continue to believe that capital spending on telecom equipment has not improved in general for the industry," he wrote, before adding that Tellabs is stuck in a trading range given the overhang of lowered carrier spending and uncertainty about the revenue ramp from new products. The recession in telecommunications spending this year is nothing new. As early as the fall of last year, there were signs that North American carriers would spend less this year than in 2000. The spending crunch has been exacerbated by the lack of capital available to startup phone companies, many of which have cut spending plans as they seek new funding. Some have recently declared bankruptcy. As a result, the continent's largest service providers no longer face as much competition for customers, and therefore aren't spending as much to protect their subscriber base. The estimated length of the spending recession is still under debate. When fiber optic companies like Corning Inc. (GLW) and JDS Uniphase and Nortel first began lowering estimates for the year, the general impression was spending would rebound in the second half of the year. There are no signs yet that will happen. Most large carriers are sticking to the spending plans they outlined early this year, or have trimmed them modestly. But there is also increasing concern that carriers may not meet those estimates. Some analysts have said carrier spending patterns so far this year suggest the carriers are not spending at a high enough trajectory to meet their year-end targets. Martin Pyykkonen, telecommunications analyst with C.E. Unterberg Towbin, said in a Wednesday note initiating coverage of Nortel at buy that the potential for consolidation among carriers could create disruption and (spending) rationalization in the near to intermediate term. However, he noted that the key variable is fundamental industry demand for units of capacity. "(Nortel) management said recently that discussions with their top-ten service providers suggest they utilize 70% to 85% of designed optical transport capacity," Pyykkonen wrote. "Remembering that service providers rarely utilize more than 90% of capacity, this should presage a boost in fundamental demand for Nortel and other optical systems suppliers' products." Few companies have been as hard hit by the slowing economy recently as fiber optic concerns. Their stocks rocketed early last year and proved fairly resilient even as the high-tech sector fell off throughout 2000. But following multiple warnings by Nortel, JDS Uniphase and Corning, the sector has been battered. Shares of Corning were recently off $1.45, or 7%, to $19.22, with volume at 6.8 million, compared with the daily average of 13.4 million. Component makers New Focus Inc. (NUFO) and Finisar Corp. (FNSR) were down almost 13% and 11%, respectively. Optical switch maker Corvis Corp. (CORV) recently dropped 35 cents, or 5.5%, to $6. -By Johnathan Burns, Dow Jones Newswires; 201-938-2020; johnathan.burns@dowjones.com (END) DOW JONES NEWS 05-30-01 01:19 PM