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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: Softechie who wrote (60037)	5/1/2002 4:53:51 PM
From: Softechie	Read Replies (1) \| Respond to of 99280

Telecoms in Close Race for Worst Customer Base By Cody Willard 05/01/2002 16:37 -------------------------------------------------------------------------------- Sure wouldn't want to be an upstart telecom-equipment vendor these days. Most of these companies are guiding their numbers lower and lower every time they talk to Wall Street. With the utter lack of access to capital from the markets, the only carriers that have money ( any money!) to spend are the incumbent local exchange carriers, or ILECs, both large and small. To a lesser extent, the long-distance carriers will still spend billions, but those dollars are tight and purchase orders for new equipment are scarce among the AT&Ts T and the Sprints FON of the world. For example, equipment vendor ONI Systems ONIS has pretty much the worst customer base in the world, selling to, among others, disappearing metro carriers that barely even got out of the gate. Yipes , the very vocal metro carrier that never met a press release it didn't like, ramped up and folded more quickly than a New Mexico rainstorm. Granted, as I've written before , ONI's merger with Ciena CIEN will open doors at paying interexchange carriers and ILECs that otherwise would've remained shut. The combination will also allow ONI to get its best-of-class optical platform into some real networks. Of course, it's not as if Ciena's customers are throwing money at it, either. Revenue for the company in the latest quarter is down some 80% vs. just the past few quarters. For those who want a qualitative analysis of such a decline, let's just say that it's not pretty. I mean, heck, ne'er-do-wells like Lucent LU and Nortel NT haven't even seen declines of that magnitude. Actually, an even worse example of a poor customer base is Sycamore SCMR . For the record, it just took down its revenue guidance for the current quarter to between $13 million to $14 million vs. the Street's estimates of $17 million. That's some 90% less than the revenue rate back in those long-ago days of early 2001. The company's primary customer base is made up of bankrupt, near-bankrupt or, at best, collapsing long-haul carriers, which, as I pointed out last October, doesn't look good. You know, now that I think about it, the owner of the world's worst customer base has to be Sonus SONS . Sonus' base consists mainly of the failed competitive local exchange carriers, or CLECs. Even its biggest and best customer, Qwest Q , isn't interested in playing with -- I mean, "building out" -- any more voice-over-Internet-protocol platforms. Qwest was Sonus' largest customer, and it even accounted for more than 10% of Sonus' revenue, although it only takes less than $2 million to claim that title. The other incumbent local exchange carriers have buying cycles that are years long, not to mention technology cycles, which can run for decades. Those ILECs are years from seriously deploying any significant VoIP solution. So while ONI, Ciena and Sycamore at least have good enough product lines that they could end up snagging some better customers and higher sales, Sonus doesn't even have that small consolation going for it. Ouch. I first wrote about the importance of having the right customer base and product lines in September. As the sorry state of these companies shows, finding, keeping and selling to those right customers (the ILECs!) is more important than ever. At this rate, these companies will have negative revenues by the end of the year. I wonder if I can sign up as a customer then. For more analysis of the telecom sector, be sure to sign up for my newsletter, The Telecom Connection. Click here for more details.