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2004 Top Ten: Signs of Recovery

Light Reading
News Analysis
Light Reading
12/29/2004

OK, OK, before you start hitting the message boards, we all KNOW that not everything's rosy in the telecom garden just yet (see 2004 Top Ten: Stock Gains & Pains).

Some of the weaker plants have yet to be weeded out, and there are others suffering from a severe case of root rot. You know who you are…

But let's not dwell on the downsides when there are the upsides to give us some post-Festivus cheer! And yes, we found 10.

10. Leading Lights Go Wild
When Light Reading launched its inaugural industry awards program in October, no one expected the response from the industry to be so great.

With only weeks to enter, and the awards ceremony only 2 months away, more than 325 nominations were received for the 11 awards -- not the response of a sector in the depths of a slump. And with so many success and growth stories it was tough to arrive at the final shortlists (see Leading Lights Awards Finalists).

If you don't know who won, you'll be shocked and amazed to know that we that we have that information right here on our humble site: LR Reveals Leading Lights Winners and A Night of Leading Lights.

9. Harry Carr Got a New Telecom Job
Yes, that Harry Carr (see Dude, There's My Carr!).

That's surely a sign of a more buoyant industry, though, of course, there are other, more disturbing evaluations that could be made.

8. Industry Event Hangovers
Our self-inflicted, alcohol-induced illnesses were heavier and more frequent in 2004, and as we hardly ever buy our own drinks (and only reach across the bar to snatch a gratis beverage on an infrequent basis), that means someone else could afford to get the check.

Ergo, the industry's in better shape.

That's an equation the accounts team at Nortel Networks Ltd. (NYSE/Toronto: NT) might have endorsed had they partaken of the bespoke cocktails on offer at the Juniper Networks Inc. (Nasdaq: JNPR) party during Supercomm 2004 in Chicago last June.

Mind you, after three of those babies, they'd probably have agreed with anything, like, say... 2+2=5, or Ben Affleck is the new Brando.

Oh…

And we're convinced we saw a senior vendor executive smoking a Cuban cigar at that very same party. Two years ago we saw the same character scratching in the Atlanta dirt for cigarette butts, so things are looking up for him at least!

Of course, the mother of all parties is Light Reading's own annual bash, also held during Supercomm season (see LR Hosts/Wins Telecom Pool Tourney). The fact that we won our own pool tournament tells you more about how we spent our youth than about the state of the industry, but we just wanted to mention it. Again.

Roll on, June.

7. Enterprises Plan Spending Spree
And not just on glow-in-the-dark paper clips and soft bathroom tissue for the executive restrooms.

According to a survey of a gazillion (OK, 109) IS/IT execs by Heavy Reading, most enterprises are set to spend more on telecom gear in 2005 (see Enterprise Spending to Rise in ’05).

And talking of companies with bigger budget plans for next year, check out Lights, Camera, Monkey! -- I mean, who'd get into the movie production business if 2005 wasn't looking good?

6. Feed Them Well and They Will Come (Sometimes)
When a cold wind blows through the telecom industry, the conference circuit gets a rather uncomfortable feeling in its nether regions. Oh yes. According to industry doctors, Optical Widgets 2003 had to be cancelled after it suffered frostbite.

So when the Links 2004 event held in California early September was sold out (even though the delegates knew Jerry Springer was the guest speaker), we knew the worst of the telecom downturn was over (see Links 2004 in Pictures (& Words) and Springer Mourns for the Middle Class).

Then, when we couldn't fit any more lean (but not that mean) industry high flyers into the recent Telecom Investment Conference (TIC) in New York City, we became as optimistic about the industry's recovery as the speakers (see Letter From TIC and From MeBay to Quadruple Play).

5. Give Us an I, Give Us a P, Give Us an O-O-O!
As much as we love our industry's vast array of three-letterisms -- we all enjoy a slug of ATM or DLC before breakfast -- there's nothing that can brighten up your day like an industry IPO.

And in 2004, we had enough of them to shake a stick at, even if you don't include Google (Nasdaq: GOOG), and there are more on the way (see Arbinet Prices IPO and Cramer Preps an IPO, for examples).

Not only that, one telecom equipment vendor even managed to raise money on London's Alternative Investment Market even before it had unveiled any products (see Session Controller IPO Scores Success). How 1999 is that?!

Other initial offerings that offered snippets of recovery evidence were: ZTE Zooms on HK Debut; Asia Carriers Live in Interesting Times ; Iowa Telecom Prices IPO; Hutchison Plots $1.5B IPO; Carriers to Cash In on StarHub; NetLogic Sags on Debut; Virgin Prices IPO; Motive Announces IPO; Peoples Files IPO; Mixed Fortunes for Euro IPOs; Opera Completes IPO; Opera Singing for Its Supper; and Investors Go Mad for Free Shares.

And who knows what might happen in 2005? (See Is Huawei Edging Closer to IPO?)

4. Mobile Merger Mania
Wireless is hot, and the U.S. wireless players have been feeling frisky this year (see Sprint, Nextel Confirm Merger, Verizon-Sprint Faces Hurdles, and Cingular Buys AT&T Wireless).

The confidence inspired by such mammoth consolidation efforts is almost palpable, and such deals wouldn't have received so much support in the past few years.

But they need to call a halt soon, otherwise the U.S.'s wide-area wireless customers could be left with just one operator called T-Cingless to sign up with.

And of course there has been plenty of other expansionist, positive M&A action this year, with some valuations perhaps stirring memories from the bad old bubble days (see EMC 'Paying Too Much' for Smarts, Cisco Plucks P-Cube for $200M, ADC Jumps on Krone, and Juniper Buys NetScreen).

On a more general, global note, financial research firm Dealogic noted recently that hostile bid activity across all industries had increased in 2004 to be worth $250 billion, the highest level since 1999.

3. Carrier Capex on the Rise
A sure a sign as any of a recovery: Carriers are planning to boost their capital expenditure (see Insider Sees 'Calm' Capex Growth and Analyst Sees Shift in Capex Trends ).

'Nuff said.

2. I Want My NGN…
And not only are the operators ramping up their spending, some of them are investing in fancy new next-generation fixed networks, that are, well, potentially risky and likely to cause a few headaches along the way.

While there's no doubt that increased competitive pressure and regulatory issues are among the factors influencing the NGN decisions of such operators as BT Group plc (NYSE: BT; London: BTA), SBC Communications Inc. (NYSE: SBC), and Verizon Communications Inc. (NYSE: VZ), such bold moves also signify a sense of optimism about future growth (see BT Moves Ahead With Mega Project, Mais Alors! Alcatel Bags $1.7B SBC Deal , and Verizon Expands FTTP Plan).

And could you imagine traditional operators seriously investing in putting video onto their networks during a slump? If so, send us some of what you've been drinking, please.

1. Carrier Revenues to Hike
It's another Heavy Reading survey, showing that the majority of carriers expect their revenues to rise by more than 10 percent, with the takeup of triple-play bundles set to play a helping hand in that hike (see Service Providers See Growth in 2005).

* * *
Now, doesn't that sound as if we've seen the worst of the telecom downturn? Eh? So let's "give it up" for 2004, a year in which the health of the telecom industry was better in December than in January. And when was the last time you could say that in all honesty? (Answers on the message boards, please.)

Next Year: The Top 10 Reasons Why the Telecom Slump Is Lingering Like a Bad Smell in an Elevator.

— The Staff, Light Reading

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