Vendors' Q3/Q4 Earnings Could Suffer
It's not necessarily just AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ), either. Calix Inc. (NYSE: CALX) had to lower its third-quarter projections, suggesting CenturyLink Inc. (NYSE: CTL) might be pinching pennies as well, as analyst Simon Leopold of Morgan Keegan & Company Inc. wrote in an Oct. 4 note. (See Calix Still Awaits Stimulus Funds.)
The most overt indication of slower spending came from Juniper Networks Inc. (NYSE: JNPR) on Tuesday, as the company said service providers are explicitly asking it not to ship purchases until 2012. (See Juniper's Getting Stalled on Revenues.)
And that doesn't necessarily mean January 2012. "Our conversations with major North American carriers suggest it could be 2Q12 before they are ready to take delivery of significant volumes of new routers," writes analyst Michael Genovese of MKM Partners .
For AT&T specifically, every area of spending has softened, even Long Term Evolution (LTE). George Notter of Jefferies & Co. Inc. thinks it's simply a case of AT&T not wanting to revise its published capital-spending forecasts, and the trend could continue through the fourth quarter.
"As we expected going into the Q2 earnings season, it's a CFO-driven slowdown in capex spending," he writes.
Another possibility is that carriers are expressing their doubts about the economy. Leopold's Oct. 4 note said carrier spending was probably muted during the September quarter, which could dampen equipment vendors' upcoming earnings announcements. Reasons he cited included "the long term focus of the budgeting process, recent mixed market signals and discussions of a possible double dip recession."
— Craig Matsumoto, West Coast Editor, Light Reading