To: deeno who wrote (4772 ) 7/11/2002 9:47:14 PM From: ahhaha Respond to First, latency is not an indicator of increasing utilization of optical equipment SONET and DWDM gear are designed to deliver voice and data in slots of traffic, and there is generally no latency at this level of the So increased latency may be a lead indicator of demand for IP routers, but not optical systems and components. ? Second, the linkage between rising traffic and carrier capex is unclear. Over the past 12 months, carriers have redeployed systems and swapped line cards from under utilized to congested routes. While such substitution is unsustainable in the long-term, we think, it also can delay a capex recovery and create sales volatility in the near-term. ? Third, utilization fluctuates widely as carriers consolidate Since many carriers lease far more traffic than they fill with customers, when they enter bankruptcy, their customers migrate to alternative carriers and large amounts of bandwidth are freed up. Given our expectation of further consolidation in the services group, forecasting capacity utilization is likely to be a moving goal post. ? Fourth, and most importantly, spending today is driven by expected ROI In the post-bubble world, capex is driven by expected return on investment, not traffic growth or page views, we think. We believe carriers will spend more on networks not when latency rises, but when ROI in data networks improves.
