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To: Dale Baker who wrote (29890)	4/22/2002 11:56:40 AM
From: Dale Baker	Read Replies (2) \| Respond to of 118717

11:39 ET Telecom Troubles : Can it get any worse for the telecom sector? In a word-- yes. Worldcom Group (WCOM) suggested as much when it lowered its FY02 earnings and revenue guidance for the second time in the past three months after Friday's close. It did so citing volume reductions associated with current economic conditions, including lower voice volumes and Internet and data network reductions by enterprise customers. WCOM's reduced guidance, we would add, follows on the heels of warnings from Qwest (Q) and BellSouth (BLS) last week, and a tepid outlook from SBC Communications (SBC), which said meeting its full-year revenue growth target could be challenging. Like many others in its space, WCOM also cut its capital expenditures forecast for 2002 to $4.5 bln from $5.0-5.5 bln. Needless to say, the capex reduction is another blow to the telecom equipment makers, which have been subjected to such revisions for some time now as the service providers have endeavored to mitigate the impact of lower demand, and excess capacity, with cost reductions. Two companies caught in the crosshairs of those cost control efforts have been Lucent (LU) and Ericsson (ERICY). Fittingly, both of those companies were sharing earnings news today. In the case of LU, it posted a narrower than expected loss of $0.14 per share for fiscal Q2 (Mar) and said it expects to see modest sequential improvement in its bottom-line, assuming no significant change in revenues, which were $3.52 bln in Q2. Even so, the company's remarks were tempered by its admission that the length of the industry downcycle remains uncertain, its suggestion that it could incur an additional restructuring charge in its bid to lower its break-even revenue level to somewhat below $4 bln from $4.25 bln, and its decision to cut another 6,000 jobs. Meanwhile, ERICY forecast wireless industry sales to be down more than 10% this year versus prior guidance of flat-to-down 10%, said it wouldn't return to profitability until sometime next year, and indicated it expects to cut another 17,000 jobs by the end of 2003. This latest round of guidance from WCOM, LU, ERICY, and others, is a blow to investors for many reasons, but the overriding message is that a recovery in the telecom sector is going to occur later rather than sooner. Subsequently, investors should continue to avoid the telecom/telecom equipment stocks as the uncertain demand environment makes them better trading vehicles than investment opportunities.-- Patrick J. O'Hare, Briefing.com