Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Alcatel (ALA) and France -- Ignore unavailable to you. Want to Upgrade?

To: zbyslaw owczarczyk who wrote (3453)	6/19/2001 9:23:02 PM
From: zbyslaw owczarczyk	Respond to of 3891

LONDON (FTMW) - Marconi [UK:MONI] [US:MONI] and Bookham [UK:BHM] [US:BKHM] said the telecoms equipment market would pick up at the end of this year, North American counterparts say they now don't see a recovery until the second half of next year. So what is the outlook for the troubled telecoms equipment market? With the dotcom boom and the deregulation of telecoms markets, a huge number of new telecoms, networking and Internet companies exploded onto the scene in the 1990s. This saw companies like Canada's Nortel [US:NT] and the US's Lucent [US:LU] and Cisco [US:CSCO] bloom. Lots of smaller players providing network equipment also popped up as more and more bandwidth was required for telecoms and company networks carrying everything from corporate and personal email to international videoconferences. Boom, bust Then the mobile communications market started booming, with subsidised handsets and free-call packages, many European countries in particular saw a phenomenal take-up of mobile phone services. Then we reached a point where the big telecoms carriers had bought their fill of equipment to cope with demand and some of the new smaller players had fallen by the wayside, been bought or simply didn't grow at the expected rate. The emphasis at the remaining operators switched from building physical infrastructure to providing services over that equipment as telecoms operators aimed to get a return on that investment - particularly in the light of shelling out billions for third generation mobile phone licences. "We had this massive push on optical infrastructure where Nortel made of lot of its business last year. The shift this year is towards the services layer," said Chris Lewis, director of telecoms research firm Yankee Group Europe. Then there was the US economic slowdown and disillusionment with hyped tech stocks. So we saw Nortel and JDS Uniphase [US:JDSU] issue earnings warnings last week. Nortel is Bookham's biggest customer. Marconi does about 25-30 percent of its business in the US and faces some tough competition from the North American market leaders and the likes of France's Alcatel [FR:013000]. It's also seen as having a portfolio of more established types of equipment rather than leading edge technology. Demand remains But obviously the world is still making more phone calls than ever, logging onto the Internet in their millions and using company networks. And as Lewis says, services are in great demand. So companies such as Orchestream [UK:OCH], Micromuse [US:MUSE] and Riversoft [UK:RSFT] are doing really well providing the sophisticated software required to manage all those services over the top of the basic network. "Orchestream, Micromuse, they're doing much better because the emphasis is now on delivery of services rather than delivery of technology." But infrastructure equipment sales will also pick up, especially as 3G networks are built, but "not for a while" Lewis said. He said the next wave of investment in fundamental infrastructure, regardless of 3G, would probably be due in about six to eight months. "All carriers in the market have to move at some point to optical infrastructure with multi-service access." Bookham specialises in optical components. Timetable for recovery Nortel said last week its bottom line wouldn't benefit from an upturn before the second-half of next year. "The prospect of recovery in the second half of this year is becoming more and more remote," said Commerzbank analyst James Heal. He said visibility for next year was still poor and Nortel's estimate was "as good a guess as anybody else's. I think the important message in all of that is that the recovery timetable is moving." Those that have emphasised services look to be in a better position. And although the market has not gone away, due to damage to share prices, there may be some major consolidation to help companies through to the other side. Some thought the Alcatel bid for Lucent was surprising, but more such offers are likely in the coming months. Marconi shares closed 0.7 percent down on Tuesday at 266 pence. Bookham fell 1.8 percent to 279 pence. Both stocks took a battering after Nortel and JDS Uniphase issued warnings last Friday. Marconi said it didn't feel compelled to make a statement revising outlook at this point. Bookham executives weren't immediately available to comment.