x
Market research

RHK: Rest in Pieces

RHK Inc. is no more, but the two parts of its business are continuing on under new monikers.

RHK's research division is being bought by U.K. market research company Ovum Ltd. (see Ovum Acquires RHK Research). Ovum has only bought the research division of RHK, which amounts to a total of 17 staff, 12 of them analysts.

RHK's consultancy business lives on as the 10th Street Advisors, a "Global Telecom Advisory Boutique" according to its Website. And with the word "boutique" in the title, we won't expect anything big. [Ed. note: Will they be selling candles and floral scented soap?]

The good news is that Harry Hamster is on the treadmill there, along with nine others including, alas, John Ryan, the R of RHK.

Fash Darabi, managing director of Ovum Telecoms, declines to say how much Ovum paid, but analysts in this field speculate that it wasn't a lot, possibly somewhere between $1 million and $2 million.

"I don't want to say that RHK has been broken up, but by breaking it up, we're picking up something that is nice and clean and profitable," says Darabi.

The reference to cleanliness refers to the absence of "liabilities and overhead" that Ovum might have been lumbered with had it bought the whole company, Darabi says. The whole company was up for sale, but "we didn't discuss the purchase of the consulting arm."

RHK's research business "was subscale," Darabi adds. [Ed. note: Maybe he meant to say "boutique."] He says it didn't have the sales and marketing muscle to sell its research worldwide. Ovum has about 230 on staff, about 25 of whom have been recruited this year, and its revenues have increased 15 percent in the past year, according to Darabi.

Observers think the acquisition makes a lot of sense for Ovum, because it brings it expertise in new areas and strengthens its presence in North America. The combined company will be known as Ovum-RHK, which sounds like a prescription treatment for migraines.

RHK's history is one that reflects the ebb and flow of the telecom industry itself. The company was founded in 1991, and, by September 2001, it had swollen to more than 130 people -- a growth of 160 percent from its January 2000 headcount of about 50. Shortly thereafter, the company's market projections began to rise while its analyst and management numbers dwindled (see RHK's Fat OSS, RHK: No Numbers for You!, RHK Changes CEOs, and RHK's OSS Loss.

As a nod to RHK's role as one of the most entertaining prognosticators in the field, we'll predict that the two parts of RHK will each grow to become a $900 billion market -- a 4,550 percent increase -- by 2022.

— Peter Heywood, Founding Editor, Light Reading

Kevin Mitchell 12/5/2012 | 3:08:53 AM
re: RHK: Rest in Pieces Unlikely
Cisco has 2 softswitches: BTS and PGW
The BTS is their CLEC/MSO C5 softswitch.
For telcos, Cisco is going to switch with packet and media processing: gateways and routers.
I don't think they want to play that game.
Plus they have the relationship with Ericsson and Italtel currently.
douggreen 12/5/2012 | 3:08:56 AM
re: RHK: Rest in Pieces particle_man,

The very fact that they depended so heavily on vendor input was a flaw in itself. You don't measure anticipated demand by what the vendors hope to sell. All vendors are going after the same business and all or believe they will capture it.

I was shocked when I was at Ciena when RHK asked us for our forecast. Being a public company we could not, and would not have anyway. We all got a laugh at Ciena when, in the early days of DWDM, RHK reported that the previous years entire market for DWDM was less than what Ciena had sold by themselves. This was probably the last time that the optical market was under-reported.

I always believed that RHK had some very smart people and I valued their advice. Their forcasting methodologies, however, would have recieved an "F" at any major university.

allidia 12/5/2012 | 3:08:57 AM
re: RHK: Rest in Pieces Back in October LR reported Cisco was likely to buy a softswitch provider within 12 months. Seeing there are 3.5 months left what's the latest on Italtel the likely partner?
particle_man 12/5/2012 | 3:08:58 AM
re: RHK: Rest in Pieces Housing bubbles, the election results, Iraq war commentary,.... you guys haven't started in on intelligent design or did I miss that in a post somewhere?

I just wanted to mention the RHK methodology, as I found their market models to be very nicely tied together and consistant. They were one of the few groups where you could actually tie component numbers all the way through system forecasts and CAPEX. I think Dana and Ron had put serious and critical thought into how they stitched together the info.

So why was it so wrong?

I would chalk this up to a mass hallucination (of which I was part or I'd be a lot richer now). They would talk to the marketing departments up and down the food chain and all of them would feed RHK the inflated numbers we all believed. There was no inconsistency visible between components and services. Everyone was swearing by their sales forecasts, and they were pretty much universaly wrong. Part of this has now proved to be fraud.

The first piece of data I saw that suggested the entire model was toast was a graph of carrier free cash flow. This was around mid 2000. It's clear the financial guys who we accused of "not getting it" fired the first warning shots.
DZED 12/5/2012 | 3:09:01 AM
re: RHK: Rest in Pieces Finally! rjm and I agree on something...

Drucker is an all round smart guy, so I'll agree with what he says too, whether or not I fully understand it.

Speculation is what creates the open loop, but then its entrepreneurship which creates valuevout of nothing. I guess its hard to separate the two.

Maybe the only way to damp it down is through capital gains tax on short term investments, say less than five years to mach the typical 'good' startup cycle. This would help focus the minds of VCs, and incidentally why old economies are typically more stable.
rjmcmahon 12/5/2012 | 3:09:03 AM
re: RHK: Rest in Pieces Where does the problem lie?

You might find the following article interesting.

Peter F. Drucker, "The Global Economy and the Nation-State," Foreign Affairs, Vol. 76, no. 5 (1997)

http://www.mtholyoke.edu/acad/...

The article makes me wonder if the creation of money and other intangible and highly liquid "securities" are in an open loop system. An excerpt describing the power of virtual money:

Floating exchange rates have created extreme currency instability, which in turn has created an enormous mass of "world money." This money has no existence outside the global economy and its main money markets. It is not being created by economic activity like investment, production, consumption, or trade. It is created primarily by currency trading. It fits none of the traditional definitions of money, whether standard of measurement, storage of value, or medium of exchange. It is totally anonymous. It is virtual rather than real money.

But its power is real. The volume of world money is so gigantic that its movements in and out of a currency have far greater impact than the flows of financing, trade, or investment. In one day, as much of this virtual money may be traded as the entire world needs to finance trade and investment for a year. This virtual money has total mobility because it serves no economic function. Billions of it can be switched from one currency to another by a trader pushing a few buttons on a keyboard. And because it serves no economic function and finances nothing, this money also does not follow economic logic or rationality. It is volatile and easily panicked by a rumor or unexpected event.
DZED 12/5/2012 | 3:09:04 AM
re: RHK: Rest in Pieces So why does the US lurch from bubble to bubble.
Recently:
Dot com
Opto
Housing

Next:
Defence
Oil exploration

Where does the problem lie?
- Too much free cash around
- Too many dumb investors getting greedy with their pension funds?
- Poor regulation by the SEC

It does seem to me running a company in the US is just a license for execs to fleece VCs and investors.
Still, that alone does keep money flowing around the economy.
rightlight 12/5/2012 | 3:09:04 AM
re: RHK: Rest in Pieces I think those who've figured out how to come out of this content and happy should post how they did it. No smartass "I shorted" or "I sold at the top and bought real estate" please. I talking about those who stuck with it and believed in the merit of this industry.

I'm looking at my buy in of NT after the November bubble popped. It stands at $50, less than half off the peak. Yet my portfolio shows a very very red 95%+ loss. I'm sure lot's of people also thought the post bubble would be something like a 30-50% haircut. But a 90%+ shave? That's the part of the post bubble that handed me my lunch.

RightLight - you can have the right light but on the wrong road.
stluka 12/5/2012 | 3:09:08 AM
re: RHK: Rest in Pieces My only sales experience was a brief stint selling encyclopedia's door-to-door in 1983. I sure wish I had been earning sales commissions at UUNET though instead of just drawing an engineers salary.

Actually UUNET did have reasonably accurate traffic data which was measured at every router and switch interface in the network. Customers were billed based on the P95 traffic load. Peering traffic was measured and used to negotiate peering agreements with other ISPs. Backbone traffic was measured to determine the health of the network.

During the period from 1995 through 2000, customer traffic increased geometrically, roughly doubling every 200 days (not 100 days). Regardless, in 1996, the ILECs and IXCs were continuing to grow there networks at only 15% each year - UUNET was forced to pay premium prices and endure long lead times when leasing circuits for its backbone.

The forecasting model that I created was intended for use at a midyear 1996 conference with all of the ILECs, AT&T, and WorldCom to convince these carriers to build more faster. It was based on best-case sales forecast but more significantly, it incorporated wildly inflated assumptions regarding the backbone capacity needed to support the predicted demand. The model predicted that by midyear 1997, UUNET's underbuilt backbone would need increase 10-fold to support demand at an acceptible level of service. This message was misinterpreted, extrapolated, exaggerated, etc. resulting in probably the most successful vendor management inititative ever executed.

But when UUNET began to believe its own BS and tried to actually grow the backbone at that rate, the folks in capacity planning argued against it. Unfortunately, no one was listening to capacity planning anymore. I transferred to network finance where I was able to prevent UUNET/WorldCom from investing in a number of trans-oceanic cable systems but my influence diminished there as well. I quit the company in disgust in 2001 a few months before the accounting scandal broke.

By the way, Andrew Odlyzko was the first person that I saw publicly challenge the growth estimates that were being touted by the entire industry. Smart guy.
stryke_d 12/5/2012 | 3:09:09 AM
re: RHK: Rest in Pieces Well said, but it is not just in the land of the free that this phenom can occur. If as whyiswhy points out even Switzerland has its foibles it is probably about time we start reconsidering the system(s) we have in place.

Hard to believe that in the end we humans are still driven by seven.
vrparente 12/5/2012 | 3:09:10 AM
re: RHK: Rest in Pieces fgoldstein: Agreed that there was no "UUnet data" -- thus the reason I put it in quotes ...
TripleChip 12/5/2012 | 3:09:10 AM
re: RHK: Rest in Pieces " I did get bloodied. I did lose a lot of money. I did help some of my fellow industry mates. But I haven't spent all my cash and I'm still trying to figure out how to come out of this with something of value."

rightlight, I applaud your stand and feel myself with you.

"So, it's not the bubble burst that gets me, it's the after effects."

Bubble was not a good thing... And would there be a bubble aftermath if there were no bubble?
paolo.franzoi 12/5/2012 | 3:09:11 AM
re: RHK: Rest in Pieces
Given our politicians (all of them both sides of the aisle) and things like bribing the local inspector for your home. You should assume every single person (without exception) involved in government is a crook, until they prove otherwise. I can not name a single politician who is out for others only for themselves.

seven
rightlight 12/5/2012 | 3:09:11 AM
re: RHK: Rest in Pieces Yes I remember Nov 2000. I also remember March 2000 as well when the DotCom bubble burst. Folks were laughing at the dumb money being lost and saying real men make real money in telecom. Talk about being handed your own lunch.

But I think most intelligent people knew that a bubble was forming and that it would eventually pop. Afterall, 10-20x Sales valuations and 1B+ acquisitions were making a lot of people "light headed" and delirious. NT at the 100+ range and I was smartly out, leading into that Nov crash. The crash was arguably predictable. What really caught me was the suckers rally. Post crash by 2001 with NT stocks at almost half the all time high, you think it was a reasonable bargain. I'm sure lot's of folks felt similar with other optic holdings. Yes we knew the storm was coming. But we thought we had enough muscle to weather the storm. We'd continue funding our optic holdings thinking we could ride out the storm, perfect storm et all. 1/2 the value? Even a 1/4 of the value? We would do the right thing and stay committed to these extremely hard working and talented crew. No different then how you stay with your soldiers with full back up when it's the enemies turn to attack. To REALLY know that Nov 2000 was not only the bursting of the telecom bubble, but a complete nuclear flattening of the entire telecom sector for almost 5 years, one would not only have such an unearthly crystal ball but such a person would have to follow through with what would seem to be bizarre behavior. You would immediately stop funding and supporting your start up soldiers, leaving them to hang and dry, or try to trade them and merge to their competitors. You would shut the door on new upcoming and talented prospects and tell them to drop it, "you'll never make it, it's a telecom nuclear winter" "Save your souls and find another job in another industry". You would short the already half off public stocks and laugh your way to their humiliating dollar status or all the way to bankruptcy. I don't know, it's just something I would not be proud of if I could look back and see what I could have done different. I would not want to be a proud soldier and survivor and say I smartly dodged the battlefield and cut and ran as my comrades died in vain. However I also would not want to be one of the heroic soldiers bankrupt in vain and gave it my all, pocketbook and all. So that leaves me at best somewhere in between? I did get bloodied. I did lose a lot of money. I did help some of my fellow industry mates. But I haven't spent all my cash and I'm still trying to figure out how to come out of this with something of value. So, it's not the bubble burst that gets me, it's the after effects.
rjmcmahon 12/5/2012 | 3:09:12 AM
re: RHK: Rest in Pieces I think it much more unrealistic to expect someone who only makes $1400 per month to understand a 600 page $110M budget. I wouldn't have my tax form filled out by someone like that, let alone give them access to my bank account.

Unrealistic or not, it happens.

And if they are in the position of voting budgets, and only vote themselves so little, I reiterate what I said.

I don't know the answer to why the pay is so low. But it is what it is.

In reality, they do make more: it's called graft.

The people I know have something called integrity. But agreed that graft and corruption can occur when societies don't fairly reward public service.

And that's where your arguement really breaks down.

So your argument is that integrity is a directly related to pay? Didn't work for Skilling and Lay, nor many, many others. I'll suggest integrity comes from somewhere else.
whyiswhy 12/5/2012 | 3:09:12 AM
re: RHK: Rest in Pieces "It's unrealistic to expect citizens of city with population of 100 thousand to read a 600 page, $110M, budget and understand the finer details while at the same time raising their families, doing their day jobs, and coaching little league events on weekends. Somebody elected to do the job can, and in many cases, does. Even when only paid $1400 per month with no benefits, pensions, etc."

I think it much more unrealistic to expect someone who only makes $1400 per month to understand a 600 page $110M budget. I wouldn't have my tax form filled out by someone like that, let alone give them access to my bank account.

And if they are in the position of voting budgets, and only vote themselves so little, I reiterate what I said.

In reality, they do make more: it's called graft.

And that's where your arguement really breaks down.

-Why
rjmcmahon 12/5/2012 | 3:09:12 AM
re: RHK: Rest in Pieces I do like the direct Democracy.

The founders of the USA built a representative republic for good reasons. Elected representatives are supposed to become wise and do the right things for their constituencies. It's unrealistic to expect citizens of city with population of 100 thousand to read a 600 page, $110M, budget and understand the finer details while at the same time raising their families, doing their day jobs, and coaching little league events on weekends. Somebody elected to do the job can, and in many cases, does. Even when only paid $1400 per month with no benefits, pensions, etc.
rjmcmahon 12/5/2012 | 3:09:13 AM
re: RHK: Rest in Pieces I knew rjmcmahon was a self-interested secret fan of the planned economy but this takes the biscuit.

DZED, I think you have misinterpreted the message in my post. I was stating the behaviors and outcomes I perceive that have come from the current Administration. Because the *feds* behave in such a manner doesn't mean *I* believe in a centrally planned economy.

Anyway, the point is that our industry needs to transcend partisan politics if it is going to achieve its potentials. I believe anybody looking for the US federal government to help is misguided as the feds are busy trying to solve "bigger" problems. My position has been one of advocating for municipal leadership in modern communications networks with private investors funding them through revenue bonds. Unfortunately, this model hasn't really taken hold as of yet. But it's the only way forward from what I can tell.

PS. I read that China has 84 mass transit projects going in today. Do you have any opinions on why and how that is occurring, comparing and contrasting it against US attempts at upgrading its access network infrastructures?
whyiswhy 12/5/2012 | 3:09:13 AM
re: RHK: Rest in Pieces After some DD (sorry, should have done this before posting the last):

"Local elections, Swiss style

GǣSOME intellectuals,Gǥ says the local newspaper editor edgily, Gǣare starting to discuss whether we should continue with it.Gǥ But he was reluctant to name a single local who might actually speak out against the Inner Appenzellers' ancient custom of electing their half-canton's government by an open show of hands on the last Sunday morning of every April. They would, he explained, be damned as GǣtraitorsGǥ by the majority who ardently feel that such traditions are vital for preserving their identity and fiercely democratic independence. Unless outside busybodies manage to invoke voting secrecy as a human right, as has happened in at least one other of the more conservative Alpine cantons nearby, the open vote, when 2,000 or so locals (in a population of 15,000 plus) fill the village square, seems likely to stay.

Only in 1971 were Appenzell men forced to let women vote in federal elections (after a national referendum). And only 12 years ago, again by a federal ruling, did women get the vote in cantonal and municipal contests.

Robert Nef, a zealous libertarian of Appenzell ancestry, argues for maximum independence not only of cantons but also of the communes within them, whose tax regimes can vary sharply. GǣWe are going in the wrong direction,Gǥ he fears. He does not like the redistribution of tax revenues among the cantons, or other proposals for harmonising various policies of cantonal governments. Like other cantons, Appenzell tries to lure rich pensioners. It has abolished most death duties; other taxes are low.

A front-page headline last week in the Appenzeller Volksfreund extolled local bakers for promising to use local butter in their bread, even though that makes it expensive. Local farmers have shrunk from a quarter of the community to 4% in 20 years. For that, outsiders are blamed, as they are for most of modernity's ills. Appenzellers are fiercely opposed to Switzerland's joining any international body, let alone the European Union, for fear of being bossed about by outsidersGa term that includes people from Zurich (the commercial capital) and Bern (the political one). Last week Mr Nef was reassured to discover that few Appenzellers even knew the Swiss president's name."

2000 loyalists crowding out all the others is the tradition they want to preserve. Seems there's not much Democracy there. More like strong arm party dictatorship. Iraq and the Sunnis comes to mind.

-Why
whyiswhy 12/5/2012 | 3:09:13 AM
re: RHK: Rest in Pieces "Switzerland is a good axample of a stable democracy. It has been around for 900 years so there must be something going for it."

Switzerland: If your family name does not go back 900 years, forget being accepted, forget getting a job, etc. I do like the direct Democracy.
fgoldstein 12/5/2012 | 3:09:14 AM
re: RHK: Rest in Pieces vp> RHK, like other analysts and researchers had access to data that differed significantly enough from the "UUnet data" (which wasn't data but which were forecasts -- to call into question the growth rates being claimed.

There weren't even any "UUNET data" to begin with! Tom Stluka, a UUNET salesman, was asked in 1996 to provide a best-case forecast of sales. He gave one that would work if the Internet were doubling every hundred days. Now most of you remember "playing telephone" as a kid. The message that emerges is a long way from the one that goes in. By 1998, Worldcom's Annual Report had turned the doubling into a historical statement, which turned out to be about as accurate as some of their other statements.
vrparente 12/5/2012 | 3:09:14 AM
re: RHK: Rest in Pieces RHK, like other analysts and researchers had access to data that differed significantly enough from the "UUnet data" (which wasn't data but which were forecasts -- to call into question the growth rates being claimed.

However, they -- when presented with that alternative data choose to tell the messengers that they were wrong instead of questioning the projections they assumed were true.

-Victor Blake
DZED 12/5/2012 | 3:09:15 AM
re: RHK: Rest in Pieces Really there is no such thing as freedom, if it does come into being it end ups in 'Lord of the Flies' fairly quickly. One man's freedom is another's tyranny.

Democracies only work if they are well balanced, between power and accountablitity.

Switzerland is a good axample of a stable democracy. It has been around for 900 years so there must be something going for it.
dljvjbsl 12/5/2012 | 3:09:15 AM
re: RHK: Rest in Pieces
Bush can say what he likes, until he actually does something there is nothing to judge by.

And I did read the article:
"The locals had been given only the vaguest notions of what sort of projects the U.S. is willing to finance. After two years of trying they had received nothing. "

Talk is cheap, action is expensive. Bombing aspirin factories is not a help.

I agree there is no point in handing aid money to dictators, but bear in mind the US, and most of the world, is happy to sit back and let them destroy their own countries. Look at Zimbabwe now. If they had oil Halliburtons private army (the DoD) would be in like a shot


Clinton bombed the factory in the Sudan - not Bush.

Clinton, the Europeans and the sainted UN allowed the genocide in Rwanda, and the ethnic cleansing and mass murder in the former Yugoslavia.

Bush is trying a different policy. As expected with most human efforts, the US governemnt is not very good at it. However they are trying to make a difference.

Unfortunately what they cannot do is raise the level of political discourse above that of the sophomore class. Now let us all have a rousing rendition of:

Bush Lied! Bush Lied! Bush Lied!

We can follow that up with the old favorite:

Bush stole the election! Bush stole the election!

We now have a new selection though:

Gore invented the Internet but Bush popped the bubble!

We'd be selling 640Gb/s links today if it wasn't for Bush!

Halliburton is building a secret FTTH network!
stryke_d 12/5/2012 | 3:09:16 AM
re: RHK: Rest in Pieces As someone from the current definition of left. I like what you are saying. Also having been involved in AID projects around the globe there is lots to be paranoid about.

Democracy doesn't always work but freedom does and I think we need to understand the difference. My own view is that political systems are only as effective as the people who choose to play (or is that pay) and those who referee it. The variations of democracy in the west are varied as well. In Switzerland you want to build a new building everyone votes on it (if I remember correctly). In the US your representative gets to decide for you.

And there is plenty of poverty at home in North America and Europe where democracy apparently thrives.
DZED 12/5/2012 | 3:09:16 AM
re: RHK: Rest in Pieces Bush can say what he likes, until he actually does something there is nothing to judge by.

And I did read the article:
"The locals had been given only the vaguest notions of what sort of projects the U.S. is willing to finance. After two years of trying they had received nothing. "

Talk is cheap, action is expensive. Bombing aspirin factories is not a help.

I agree there is no point in handing aid money to dictators, but bear in mind the US, and most of the world, is happy to sit back and let them destroy their own countries. Look at Zimbabwe now. If they had oil Halliburtons private army (the DoD) would be in like a shot.
Balet 12/5/2012 | 3:09:16 AM
re: RHK: Rest in Pieces Very nice answer, DZED.
As a former planned economy victim I can say that you are absolutely right.
It looks as BKHM did not destroy people's minds:)
DZED 12/5/2012 | 3:09:17 AM
re: RHK: Rest in Pieces I knew rjmcmahon was a self-interested secret fan of the planned economy but this takes the biscuit.

o Transform the Middle East into a democratic society

Why the middle east? Why not Asia or Africa or China? Could it be they don't have oil?
This idea failed in Vietnam, Vietnam 2 (Iraq) isn't going so well either. Latest reports suggest the Bush administration admits its got another 12 years of 'insurgency' ahead and its likely to spread to the rest of the middle east fairly quickly. Good job so far, whats next?

o Keep China from buying up the strategic oil/energy assets while promoting free trade

Do you want free trade or don't you? Make up your mind. If you legislated your SUVs off the road the US would not even need middle eastern oil.
If your industry weren't so inefficient you'd be in an even better position. Maybe there should be a federal law to teach evolution and global warming, no wait, your president doesn't believe in either.

o Put a floor under the US stock market for when the baby boomers begin withdrawing

You want to interfere in THE key part of a capitalist economy, the stock market? and how would you fund it? Raising central taxation? Jawohl mein herr!!

o Find a way to pay for all those healthcare promises (placebos, placebos, and more placebos??)

I presume your plan is to tax everyone but rjm to pay for it?

My assumption is you're one of the infamous 'baby boomer' group, the most selfish generation the planet has seen.
fgoldstein 12/5/2012 | 3:09:17 AM
re: RHK: Rest in Pieces l333> By the way, with regard to "creationism," one of the big advocates these days of the Intelligent Design species of creationism is out formerly sainted friend George Gilder.

So there is a link between all this stuff to overly optimistic predictions for the optical networking business after all.


Gilder has long been associated with The Discovery Institute, a creationist club. They have hosted his web site, for instance. I think this relationship goes back farther than the current euphemism "Intelligent Design".

But then Gilder's version of boom-era technology (remember his writeup of CDMA which made it seem like it created infinite bandwidth?) involved faith-based engineering and faith-based economics. He never let science or facts get in the way of a good pitch.
dljvjbsl 12/5/2012 | 3:09:17 AM
re: RHK: Rest in Pieces
DZED questions:

Why the middle east? Why not Asia or Africa or China? Could it be they don't have oil?

I know that I will regret this but the following column from the New York Times describes Bush administration efforts to introudce democray and other forms of good governance to Africa. Bush believes that Afrcan poverty is created and perpetuated by the faile institutions that govern Africa. Hence they are concentrating the American aid budget (which they have doubled) into efforts to improve governance, spread democracy etc.

Now, this injection of fact may change the climate of arm waving invective that permeates this board but I doubt it. What is more likley to happen is that I will be personally criticised for some spurious reason to divert attention from an uncomfortable reality.

Anyway here is the URL for the column

http://www.nytimes.com/2005/06...
larry333 12/5/2012 | 3:09:18 AM
re: RHK: Rest in Pieces Hmm, no I don't think you mentioned that before. But thanks for sharing.


"Golly, gosh Jim. You're just too clever and masterful for me!" Thanks! Did I mention that I'm also blind to sarcasm.
jim_smith 12/5/2012 | 3:09:18 AM
re: RHK: Rest in Pieces Golly, gosh Jim. You're just too clever and masterful for me!

Thanks! Did I mention that I'm also blind to sarcasm.
larry333 12/5/2012 | 3:09:18 AM
re: RHK: Rest in Pieces Golly, gosh Jim. You're just too clever and masterful for me!

jim_smith 12/5/2012 | 3:09:18 AM
re: RHK: Rest in Pieces Sorry, but I have no idea what in the world you are talking about.

Great! Let's keep it that way ;-)

This thread has now been formally closed.
larry333 12/5/2012 | 3:09:18 AM
re: RHK: Rest in Pieces Sorry, but I have no idea what in the world you are talking about.


L: ... as I hinted in my post before, I suspect Christians are not quite as stupid as you think.

J: And I suspect stupid people are not quite as un-Christian as you think.

L: ... off the topic again. But I don't think I said that. Did I?

J: Off the topic?! It couldn't be more on the topic! And what do you mean by "I don't think I said that"? ... Oh, I see. You meant Christians are stupider? Shame on you.

BTW, I thought you were "outta here" because of the "off topic" discussion. So why did you come back? I didn't call you.
jim_smith 12/5/2012 | 3:09:19 AM
re: RHK: Rest in Pieces L: ... as I hinted in my post before, I suspect Christians are not quite as stupid as you think.

J: And I suspect stupid people are not quite as un-Christian as you think.

L: ... off the topic again. But I don't think I said that. Did I?

J: Off the topic?! It couldn't be more on the topic! And what do you mean by "I don't think I said that"? ... Oh, I see. You meant Christians are stupider? Shame on you.

BTW, I thought you were "outta here" because of the "off topic" discussion. So why did you come back? I didn't call you.
larry333 12/5/2012 | 3:09:19 AM
re: RHK: Rest in Pieces "That's a cheap shot. The dismal state of our education system has nothing to do with the evolution vs. creationism catastophe."

By the way, with regard to "creationism," one of the big advocates these days of the Intelligent Design species of creationism is out formerly sainted friend George Gilder.

So there is a link between all this stuff to overly optimistic predictions for the optical networking business after all.

L

larry333 12/5/2012 | 3:09:19 AM
re: RHK: Rest in Pieces as I hinted in my post before, I suspect Christians are not quite as stupid as you think.

And I suspect stupid people are not quite as un-Christian as you think.


. . . off the topic again. But I don't think I said that. Did I?
jim_smith 12/5/2012 | 3:09:19 AM
re: RHK: Rest in Pieces Now it's being reinforced by religious "leaders" who are trying to get it into pubic schools. And people wonder why China and India are catching up.

That's a cheap shot. The dismal state of our education system has nothing to do with the evolution vs. creationism catastophe.

Put the blame where it belongs: an educational system that is not held accountable for the deplorable quality of education it provides.

Blame the teacher's union. Blame the practice of promoting kids to the next grade regardless of whether they can read or write.

I don't know why we still call these institutions "high schools." They should be called teenage day cares.
jim_smith 12/5/2012 | 3:09:19 AM
re: RHK: Rest in Pieces ... as I hinted in my post before, I suspect Christians are not quite as stupid as you think.

And I suspect stupid people are not quite as un-Christian as you think.
jim_smith 12/5/2012 | 3:09:20 AM
re: RHK: Rest in Pieces "This nation should send a Man on the Moon ...", etc.

I think everyone agrees that the we made great technological advances because the president made going to the moon a national priority. I think that was one of the best policy decisions any government ever made.

May be that's the approach we should be taking for building tomorrow's telecom infrastructure.

But, wait a second. Isn't that what we are doing anyways? Lets see... we waited till the Russians put a man around the earth and then we beat them to the moon. Well, so let's wait till the high-bandwidth fiber networks around the world generate a tangible economic/social benefit, and then we will go ahead an beat them.

Thanks! I never thought about it that way. We are doing everything right! We are the best! Ha ha look at all those fools sinking money in those fiber networks! It's all part of the grand plan :-)
dwdm2 12/5/2012 | 3:09:20 AM
re: RHK: Rest in Pieces "What are the criteria before a municipal government will act and start building communications infrastructures that serve the public interest?"

Would've been nice if munis did it... Most likely munis are already facing lots of mandates, many are unfunded. Unless the Fed provides a mechanism, I'd venture to guess that it'd be difficult to convince them. Few days ago I attended a local "telecom task force" meeting. Everyone detests the so called cell tax. However, some pointed out that FO line passing through our State but there is no mechanism to make use of'em. Is it shortage of technology or lack of good will? I'm still trying to learn...
dwdm2 12/5/2012 | 3:09:20 AM
re: RHK: Rest in Pieces "..., and more interested in protecting incumbents than in letting a real competitive market bloom. That impacted the economy."

This and a few other factors impacted the downfall. At any rate, "bubble" was not a healthy thing... Coming back to RHK issues, they were not the only company who's projections were wrong as pointed out by few others on this thread. In fact, I personally have never used any RHK numbers in some of the projection we made for our products simply because RHK did not cover them enough and/or their report was too expensive. But at the hind sight, it would not make a big difference if we did use RHK numbers vs. some others that we used.

My point is, in general, there is not much difference between foecasting and fortune-telling, if one disregards the graphs and charts the forecasters use. Some forecasting becomes true just like some fortune-telling becomes true. BUT political environment DOES play an important role. For example (and my favorite example), "This nation should send a Man on the Moon ...", etc. So think, before flipping the flame switch ;-)
larry333 12/5/2012 | 3:09:20 AM
re: RHK: Rest in Pieces . . . as I hinted in my post before, I suspect Christians are not quite as stupid as you think.

But even if half of the U.S. thought that dinosaurs and mankind lived together and other the other half thought that the purpose of politics was to perpetutate technological progress, which half would be guilty of the greater error?

None of which has anything to do with the sad story of RHK. So I'm out of here.

L
rjmcmahon 12/5/2012 | 3:09:20 AM
re: RHK: Rest in Pieces BUT political environment DOES play an important role.

Agreed. What are the criteria before a municipal government will act and start building communications infrastructures that serve the public interest?

For example (and my favorite example), "This nation should send a Man on the Moon ...", etc

Below is a list of goals which is equally ambitious:

o Transform the Middle East into a democratic society
o Keep China from buying up the strategic oil/energy assets while promoting free trade
o Put a floor under the US stock market for when the baby boomers begin withdrawing their 401Ks (create demand by forcing payroll taxes into US equities??)
o Find a way to pay for all those healthcare promises (placebos, placebos, and more placebos??)

The above is probably all this Administration can handle right now. Our industry hoping for federal assistance probably wasn't going to bear fruit, 2000 election controversy or not.
fgoldstein 12/5/2012 | 3:09:21 AM
re: RHK: Rest in Pieces Well, no, I don't claim a direct line to eternal truths, but then I'm not implying infallibility, either (and I am not referring to the Pope), or getting elected by having preachers tell consitutents that they'll Burn in Hell Eternally if they vote their economic interests over the preacher's.

Not all religious people are primitive, but there are some primitive religious beliefs that are being exploited by unscrupulous politicians. Half of the US public seems to believe that dinosaurs and people walked together. It must be true, they saw it on The Flintstones! Now it's being reinforced by religious "leaders" who are trying to get it into pubic schools. And people wonder why China and India are catching up. China is horribly antidemocratic and treats many of its people like dirt. But their ruling Politburo is now made up entirely of engineers. It tells you something about priorities.

The point I was making, that was quite relevant to the RHK discussion, is that the 2000 election was very much the end of an era, as perceived by investors, more so than Nortel's specific problems. Nortel's Canadian-ness doesn't matter, either, given how much of their sales were stateside. The election delivered a swift kick in the pants to the go-go "new economy" attitude that let investors spend with abandon, expecting prices to rise forever (as they never do). At first, investors didn't like the uncertainty. Later, the new regime was more interested in the extractive industries than in technology, and more interested in protecting incumbents than in letting a real competitive market bloom. That impacted the economy.
larry333 12/5/2012 | 3:09:22 AM
re: RHK: Rest in Pieces Let's see now. Bush is stupid. Gore is stupid. Religious people are primitive. . . such wisdom!

We should truly thank heaven for people like Mr. Goldstein who can use clever words like "meme" and "lonary", write books, and have a direct line to eternal truths.

L
paolo.franzoi 12/5/2012 | 3:09:22 AM
re: RHK: Rest in Pieces
I don't want to go there, but is is factually accurate that the Miami Herald, Washington Post, and New York Times all did separate recounts and found that Bush won by a larger margin than the certified results. I agree with Drew that the margin of error in our voting processes was larger than the margin of victory. I am also pointing out that 100s of thousand of other voters were disenfranchised.

It also has nothing to do with the election, because it wasn't Nortel that was first...it was Copper Mountain. Also, please note Nortel is Canadian.

seven
desiEngineer 12/5/2012 | 3:09:23 AM
re: RHK: Rest in Pieces fg: Seven, you are factually wrong about the recounts, but this is not the place to argue them. Besides, I was noting that ChoicePoint, the folks who take such good care of our confidential credit card data, knocked thousands of good legal Democratic voters off of the rolls, so they showed up at the polls and couldn't vote.

Well, then don't argue it. You can't say don't argue, and then take a parting shot. That's simply faking that you are taking the high road.

And it's really going to take this thread down the liberal-vs-conservative hate channel.

-desi
OpticOm 12/5/2012 | 3:09:25 AM
re: RHK: Rest in Pieces Please stop the nonsense about "stolen election".
It had been proven over and over again to be a false statement, propagated by left nuts.
And I have no intention to listen or discuss further politics on LR posts.
And now, back to the technical discussion....
fgoldstein 12/5/2012 | 3:09:26 AM
re: RHK: Rest in Pieces Seven, you are factually wrong about the recounts, but this is not the place to argue them. Besides, I was noting that ChoicePoint, the folks who take such good care of our confidential credit card data, knocked thousands of good legal Democratic voters off of the rolls, so they showed up at the polls and couldn't vote.

The LR-relevant point is that the election marked a national trauma, and thus changed investor perceptions.
fgoldstein 12/5/2012 | 3:09:27 AM
re: RHK: Rest in Pieces Drew, you may still cherish your beilef that the election was a "tie", and disregard the 20,000 or so predominantly Democratic voters in Florida disenfranchised by ChoicePoint's antics, but that's not the point. It isn't simply that Gore had more klew about a technology-based economy. It isn't that the Clinton-Gore economy was based on cheap capital (low interest), technology, and young educated workers, while the Bush economic platform was based on extraction industries (oil and gas), high interest (it failed miserably there, trying to increase yields for its wealth-owning benefactors), ignorance (anti-science primitivist religion being given official backing) and foreign workers. No, that wasn't it. Well, at least not all.

The election was, more importantly, a national trauma, one of those events that delineates eras. It was an incredibly divisive election, building upon the fault lines of the Clinton impeachment. And when it did not resolve cleanly, it was clear that the "era of good feeling" -- at least among the financial class, not the political class -- was over. Sure, Bush likes to yap about "September 11", as his code word, as an excuse for whatever he wants. And that too was a national trauma. And it followed close on the heels of the election, putting that out of some people's minds. But by then the economy was already melting down. September 11 did become a convenient excuse, but it's like blaming somebody for starting a fire after the house is half burned down.

Investment is largely a mental and emotional game. Do people think that other people will think that the investment will be worth more? In other words, people buy expecting a greater fool. When the mood shifts downwards, people no longer expect a greater fool to appear, so overvalued things go pop.

Mental exercise: Do you remember the "All your base are belong to us" fad? It was a huge laugh, getting used all over the place and adapted to new things, all through the summer of 2001. On September 10, "All your base" was ubiquitous. On September 12, it was entirely forgotten.

Lest that be used as confirmation of the magic power of that particular date, I raise another precedent. Remember the Beatles? When did they hit the USA? In early November, 1963, they were a new hit act from England, already a hit there but hardly a social phenomenon. November 22, 1963 happened. National trauma. Once people started getting over it, the Beatles were suddenly the cheery, happy-screaming phenomenon that everyone wanted to talk about. I don't see it as entirely a coincidence; their famous Ed Sullivan appearance in February, 1964 confirmed a Beatlemania that had started to build maybe a week after the JFK funeral. (Yeah, I'm old enough to remember that better than I can remember to put the clothes into the dryer.)

I used the term "perfect storm" in the preface to Meltdown. The CAP/CLEC, IXC, ISP and wireless industries all started to get in trouble, for their own reasons, at the same time, and the storm forces converged. I didn't want to politicize the book by mentioning the more-than-coincidence of the election, but the connection strikes me as extremely probable.
paolo.franzoi 12/5/2012 | 3:09:27 AM
re: RHK: Rest in Pieces
All the Florida recounts done by newspapers after the 2000 election showed that Bush won by a larger amount than the official election total. This does not count the fact that Gore was announced as a winner while polls were open in Republican dominated areas in Florida.

seven
Scott Raynovich 12/5/2012 | 3:09:27 AM
re: RHK: Rest in Pieces Hey optical_man,

We started a new thread over here:

http://www.lightreading.com/bo...

Want to post your message there?

--Scott
optical_man 12/5/2012 | 3:09:28 AM
re: RHK: Rest in Pieces To begin a proper debate, I put forth the following:

Resolved: The Housing Bubble in America does not exist.

Pro: U.S. Consumers have learned not to overspend on singularly focused investments. They have learned that any investment, be it Stocks, Bonds, Muni's, Real Estate, is fluctual, and as such, have spread their investments across many areas, not just Real Estate.

Con: In the post bubble 2001+, U.S. Consumers moved their investments from a seemingly secure, yet unsecure, Stock Market; to a seemingly secure, yet unsecure Housing Market. The same results will follow. Housing will collapse, taking the U.S. economy drastically down for at least 5 years.

Begin debate!

Drew Lanza 12/5/2012 | 3:09:28 AM
re: RHK: Rest in Pieces Nortel made an annoucement in mid-November that it wouldn't meet expectations and that there were serious troubles.

Telecom stocks had started to fall earlier that year (I think they peaked in April of 2000).

Showing you how clueless I am, it never occured to me that the conjunction of a 'tie' in the U.S. Presidential race and large companies like Nortel saying that the Emperor was wearing no clothes might have created a sort of perfect storm where savvy players concluded that the industry was in trouble AND we could forget getting any help from the government.

foldstein says that Bush stole the election. That's not the way the vast majority of people see it. Most of us see it as a tie. But one in which people got really ugly fighting for the ball. If Gore had walked away with the ball I'm sure that 20% of the populace would say that he cheated. Politics is hardball.

Still, if we were all a little smarter, we would have realized that in a 'tie' situation like this, the odds of either candidate having a clue how much trouble our industry was in and stepping in to force a transition to broadband (like Korea, Japan and some European countries did) were zero.

Thanks for enlightening my day, fgoldstein!

P.S. If anybody really wants to keep this going, I'll try to dig out the press release from Nortel which caused Lightwave Microsystems to shelve its IPO. I think it was dated November 8, 2000. That's when I personally came to believe that the bubble had burst.

Drew
5514DD 12/5/2012 | 3:09:29 AM
re: RHK: Rest in Pieces You are kidding, right?



To bring it back on topic for telecom, there was a plot once for a "zero floor space 5ESS."

kww 12/5/2012 | 3:09:29 AM
re: RHK: Rest in Pieces >You are kidding, right?

Absolutely not. This little scheme was floating around in the early 90s. Didn't get much beyond the concept stage. The capacity of the blower that could generate enough horizontal air flow to not cause weird heating problems at the side of the frame that had magically become the top was pretty high, and the thermal modelers killed it. I don't think it even made it to a mock-up.

I stumbled across documents about it while working on one of the myriad plans for creating a hybrid of the GTD-5 and the 5ESS so that they could put AGCS (nee Automatic Electric) out of business.
voyce_overipee 12/5/2012 | 3:09:30 AM
re: RHK: Rest in Pieces Didn't LR also buy into the optical bubble? I mean isn't that why you created and named it Light Reading - to play into the optical market?
(not accusing, just curious)
Not that that's a bad thing, and certainly not related to RHK's role.
voyce_overipee 12/5/2012 | 3:09:30 AM
re: RHK: Rest in Pieces He said land - as in Real Estate. Not Fake Estate, as in Condo. And as I recall the 80's housing bubble burst - it hit Condos the worst.

I lived in both the northeast boston area (which is bad) and the SF area sunnyvale (which is much worse). But as much as i kept thinking it was a bubble waiting to burst (who can afford those houses?), the problem kept being that the land is the limited supply, population keeps increasing in those areas, so demand won't let the price drop in the long run. I mean even after the 80's housing crash, the recovery was pretty quick (5yrs?), and we're way past those values today.
jim_smith 12/5/2012 | 3:09:31 AM
re: RHK: Rest in Pieces The problem with calling the housing market a bubble is that ...

Yikes! We have a home owner amongst us who is living off his reverse mortgage!

Handle with extreme care. It's deja-vu all over again. It's like talking to a guy in 2000 who went on a spending spree in cuckoo land hoping that his dotcom options will eventually pan out.

Scott, you have been warned.

... real estate is a smart investment for the long run ...

Jonathan Clement, who writes for the WSJ, recently had a nice article that debunked the myth that buying a house is a good "investment."

Over the long run, buying a house is better than renting, but please don't call it an "investment."
Scott Raynovich 12/5/2012 | 3:09:31 AM
re: RHK: Rest in Pieces >land is a resource that is fixed

Actually, I work in Manhattan, and I can tell you for a fact this is not true.

Here in NYC, they create real estate out of thin air. Literally.
kww 12/5/2012 | 3:09:31 AM
re: RHK: Rest in Pieces >Here in NYC, they create real estate out of >thin air. Literally.

To bring it back on topic for telecom, there was a plot once for a "zero floor space 5ESS."

In short ... tip the frames over, put giant horizontal blowers on the side, and false floor over it. Craftspeople would have to crawl on their hands and knees to repair it, but you didn't have to use valuable office space for silly things like equipment racks.
Kevin Mitchell 12/5/2012 | 3:09:31 AM
re: RHK: Rest in Pieces
<here air.="" create="" estate="" in="" literally.="" nyc,="" of="" out="" real="" they="" thin="">

But still fixed on a plot of land. Unless you fill in wetlands, use airrights above highways/railways, or have the ability to build structures that float on air, real estate is still attached to a fixed and disappearing resource.

Now space...that's an untapped area to build.
</here>
Kevin Mitchell 12/5/2012 | 3:09:31 AM
re: RHK: Rest in Pieces <yikes! a="" amongst="" have="" his="" home="" is="" living="" mortgage!="" off="" owner="" reverse="" us="" we="" who="">

No reverse mortgage here; bought in 2002 with a nice low rate and sizable downpayment.

Unless you benignly control volanic activity, coastal erosion, or tectonic plates, there isn't any more land creation going on. Land is being purchased for commercial or residential use or public space. It's a resource that is disappearing as a unqiue one to own, especially in desirable areas of the world.

<over "investment."="" a="" an="" better="" but="" buying="" call="" don't="" house="" is="" it="" long="" please="" renting,="" run,="" than="" the="">

Annual tax reductions, generally higher price at sale than at purchase, collateral for low interest loans, multiple ways to take money out,...sounds like an investment to me.

Buying a 1000sq foot shack in blighted area that has a tendancy for earthquakes for $1M may not be an investment, but great swaths of real state purchases are.

Just like LR message board postings are not the word of god, nor are WSJ articles.

</over></yikes!>
Kevin Mitchell 12/5/2012 | 3:09:32 AM
re: RHK: Rest in Pieces >My leading housing bubble indicators are: Folks prattling on about real estate gains at cocktail parties (much like they touted gains in Gilder stocks in 1999); relatives offering condo-flipping investment opportunities; ugly-ass giant McMansions in the most uncanny places (like, on top of steaming trash heap or built on stilts in a swamp -- but hey, it's got granite counters!).

But the gains and crazy prices of bungalows are nothing new; that's been evident since the late 90s, coming off the housing downturn of late 80s and early 90s.

The problem with calling the housing market a bubble is that it's the fundamental fact is that land is a resource that is fixed and not growing and people want to own homes and there are good financial reasons to do so: investment and taxes. Why some prices in some areas are certainly overvalued, it's not based on false promises. In the absence of war, natural disaster, or Armageddon, real estate is a smart investment for the long run, whereas certain stocks or investment sectors are based on unsound fundamentals.
jim_smith 12/5/2012 | 3:09:32 AM
re: RHK: Rest in Pieces Scott, for your housing bubble prediction: all regions at once? Or a domino effect? This a US only prediction?

If I read Scott's post correctly, he is limiting his prediction only to properties in north west Idaho and the French riviera.

I thought Scott was kidding when he made that prediction. But now I'm not so sure because others on this message board seem to be taking his proclamation seriously.

Anywho, I'm desperately waiting for that bubble to burst because all those articles that are predicting a post-bubble global depression are keeping me awake. It also doesn't help when Mr. Greenspan keeps poking it with his vague soundbites. Just stick a freaking needle in it and get it over with.
Scott Raynovich 12/5/2012 | 3:09:32 AM
re: RHK: Rest in Pieces >I'm desperately waiting for that bubble to >burst because all those articles that are >predicting a post-bubble global depression are >keeping me awake.

Hey Jim, I agree. And say, I've fired up our own new housing thread. So pitch in here:

http://www.lightreading.com/bo...
Scott Raynovich 12/5/2012 | 3:09:33 AM
re: RHK: Rest in Pieces >Scott, for your housing bubble prediction: all >regions at once? Or a domino effect? This a US >only prediction?


Housing: I've been reading and studying this a lot about this lately. I have the added bonus of having R.E. pros in my extended family.

My leading housing bubble indicators are: Folks prattling on about real estate gains at cocktail parties (much like they touted gains in Gilder stocks in 1999); relatives offering condo-flipping investment opportunities; ugly-ass giant McMansions in the most uncanny places (like, on top of steaming trash heap or built on stilts in a swamp -- but hey, it's got granite counters!).

Australia and the UK have already eased off, and they were leaders in the global housing market. So they may be the leading indicators. I've read stuff that says Sydney, Australia is off 10-15% in the first year of their decline -- that may be the model.

Here in the U.S., I would imagine where there has been the most speculative excess there is the most risk (both coasts). For most people, if you've owned a house a while and built equity, it's not a problem, but for the speculators and overleveraged pretenders who are buying or building on spec with interest-only loans, it will be a bloodbath. For example, I can imagine brand-new unsold McMansions in IPOville, Calif. falling 25% or more.

If you live in Detroit, Mich., absolutely nothing has changed nor will change.

Kevin Mitchell 12/5/2012 | 3:09:33 AM
re: RHK: Rest in Pieces Scott, for your housing bubble prediction: all regions at once? Or a domino effect? This a US only prediction?

Kevin Mitchell 12/5/2012 | 3:09:33 AM
re: RHK: Rest in Pieces Re: Nov 2000

Talking about difficulty in forecasting, wasn't John Chambers still talking in Dec 2000 how Cisco were going ahead with the same growth predictions and they didn't seem any disuption. This is a company to tightly wound up with the channels and visibility into customer activity and they clearly got it wrong. In part, perhaps, due to all the money they were giving CLECs to buy their gear...sure, the contracts are still on, cuz we're paying for them!!
fgoldstein 12/5/2012 | 3:09:34 AM
re: RHK: Rest in Pieces sr> I want to go on the record as declaring the housing investment bubble will end March 1, 2006.

You're late. I call it for May 1, 2005. At least up here.

BTW the Greenspan article was good reading, and hit the nail on the head when it noted that there was a lot of "investment" money coming in while there were few new productive assets to invest in, so things got bid up. A parallel was the term "drilling for oil on Wall St.", wherein the oil companies bought each other up because it was a safer bet than actually producing more.

My cow-orkers and I saw the tech bubble for what it was, noting the nutty "investments" that were being proposed. I also date it bursting at November, 2000. It may or may not have been coincidental with the discovery that the election was being stolen in Florida. The Meldtown took the next two years, as service providers and their suppliers lined up at the courthouse.

Housing: It's insane. But it's hitting real resistance. A house in my city went on the market for $1.275M in February. (Some say it was initially 1.4M.) Not a bad house, but no mansion, just a nice old 9/5/3 colonial with finished attic and basement on a 9ksf city lot, semi-busy street. By early June it was down to 1.075M, and this week it's at $999k. The owner's desperate, having retired and moved out already. That price range is roughly the mode here, with dozens of houses in the $1-1.4M range, and they're not moving easily. Cheaper properties have more potential buyers so if they're priced right they still move, but the mood has swung.
5514DD 12/5/2012 | 3:09:34 AM
re: RHK: Rest in Pieces Scott (or others),

Care to go one step further and declare how far we'll see housing prices fall?

Scott Raynovich 12/5/2012 | 3:09:35 AM
re: RHK: Rest in Pieces I want to go on the record as declaring the housing investment bubble will end March 1, 2006.
DZED 12/5/2012 | 3:09:36 AM
re: RHK: Rest in Pieces This is the closest (and only) example I know of.

http://securities.stanford.edu...
http://securities.stanford.edu...

GS used their own internal analysts to plug the shares.
Peter Heywood 12/5/2012 | 3:09:36 AM
re: RHK: Rest in Pieces In the bubble years, there were lots of rumors of market research companies asking and even insisting on being paid in stock for providing upbeat quotes in product press releases etc.

Does anybody have any first hand experience of this?

If so, let me know by either posting on this board or contacting me privately on [email protected]
DZED 12/5/2012 | 3:09:38 AM
re: RHK: Rest in Pieces "We have a lot of analysts who are great at linear prediction of the future based on the past"

Its even worse than that, they were predicting EXPONENTIAL growth based on three closely space data points.

Remember the internet 'doubling every 100 days'? (Is that what Worldcom said, not too sure now..)

Why did no-one see through this guff?

It was patently obvious DWDM was not going to happen based on the small amount of FTTH really going on.

Why would the world need 120x10=1200Gbps pipes when consumers would be on copper for the forseeable future?

In my area we saw orders for access components dry up, but DWDM was still going great? It was so obvious, how could RHK not see it?

I made these points at the time, although not to Lightreading.
rjmcmahon 12/5/2012 | 3:09:38 AM
re: RHK: Rest in Pieces Before I can comment, however, I need to educate myself about if the above is true. There are competing technologies available. I'd like to learn what technologies Hong Kong or Japan uses for their Gbs connections. Are they offering to homes directly on Fiber? What kind of computer the end users have to utilize this Gbs signal and what technology enables such use? (forgive my ignorance).

Unfortunately, I can't speak for what is true so I can't help with that. I can recommend using http://www.google.com and the site command such as

"site:convergedigest.com last mile hong kong"
"site:convergedigest.com fiber japan"
"site:broadbandreports.com usa fallling behind"

as a mechanism for getting more perspectives.

My only point is an appropriate technology (i.e., one that is available, cheaper, easily deployable and maintainable, etc.) can alleviate/remove other hurdles.

I hear and understand your point.

Here's another hypothetical. If an important sector of an economy is experiencing market failure and municipal, state, or federal government do nothing about it (or worse, are part of the problem) and the tools you mention don't really help too much, what's next?
larry333 12/5/2012 | 3:09:39 AM
re: RHK: Rest in Pieces Thanks Nietzsche. You are my favorite philosopher!

As I pointed out before, there's really no way that a competent analyst is going to come up with stuff such as $10 billion for the WDM components market. But the analysts I knew from RHK were quite impressive, so somebody there was changing the numbers to make them meet the "needs" of RHK's customers. As the guy from ADL pointed out, it really wasn't that hard to come up with forecasts that weren't orders of magnitude too high.

B-u-t (And its a big but) some of the posts here seem to get close to blaming the whole bubble thing on RHK or John Ryan personally. Of course, we all know that RHK was also behind the Kennedy assassination.

L
kww 12/5/2012 | 3:09:39 AM
re: RHK: Rest in Pieces I'm pretty sure that I earned my position through 17 years of engineering in telecom. CTO is the most frustrating position on earth, though. Too market oriented for engineering to respect you, and too engineering oriented for marketing to respect you.

KWW
dwdm2 12/5/2012 | 3:09:39 AM
re: RHK: Rest in Pieces "I don't get a lot of credit for that. ...
Owner, The Great Escape Hotel, Bonaire"

Congratulations on your new (and presumably happy) carrier.

I know lot of people got CxO positions by the stroke of luck during the pre-bubble era and eventually they caused and blew the bubble. Many, OTOH, who earned the position stayed in it, suffered with it, and trying to make a difference for better. It all depends on personal choice(?). Cheers.
kww 12/5/2012 | 3:09:39 AM
re: RHK: Rest in Pieces I seem to remember screaming it out loud at anyone that would listen throughout most of 1999 and 2000 that telecom couldn't hold that many players, and that all of the CLECs were doomed. My e-mail tends to agree with you, though. Sometime in late 2000, around November, I switched from being a vocal minority member to being a vocal majority member.

In retrospect, we all should have noticed that RHK's numbers for telecom spending would exceed the US GNP by 2007.

I think that Scott Raynovich hit it on the head with:

"People kept doing more and more stupid stuff right on through the end of 2002 -- possibly even into 2003 -- when I think the psyche of the industry may have bottomed.

Shouldn't folks get credit for how quickly they realized they were doing/saying stupid stuff? "

I don't get a lot of credit for that. 2003 is when I realized that there just wasn't room for another SONET chip company. It took me until early 2004 to realize that I needed to run like hell, and nearly a year to actually do it.

Kevin Wayne Williams
Former CTO, Mayan Networks
Owner, The Great Escape Hotel, Bonaire
jim_smith 12/5/2012 | 3:09:40 AM
re: RHK: Rest in Pieces I don't think anyone can predict when a bubble is going to burst (at least not the folks who post on this board :-). Because if they could, they would be really really rich by now.

There were many articles that called the bubble. I remember reading an article in 1999 to that effect in Barrons (or one of the other Wall Street mags). But none of those articles could have credibly predicted when the bubble was going to burst.

The same is true of the current housing bubble. Everyone (except for those who lack common sense) knows it's bound to deflate. The trillion dollar questions are when, by how much, and for how long?
Drew Lanza 12/5/2012 | 3:09:40 AM
re: RHK: Rest in Pieces Scott:

There were a lot of us here on the West Coast who saw Nortel's pronouncements in early November of 2000 as the bursting of the telecom bubble. I just went back through my emails and there's a fair amount of traffic to that effect in my email that month.

I can tell you that's when I felt that the boom was not suatinable and that's also when I made a career choice to move in a different direction. I know there were a lot of people out here who felt the same way that I did.

You're correct that the industry had a lot of momementum and it took the rocket ship a fair amount of time to fall back down to earth.

When they write the history, I think they will identify November of 2000 as the beginning of the end. There were many who forecast the unsustainability of the bubble before then. That was not hard to forecast.

But anyone who forecast the timing and the reasons behind the bursting (and some have been pointed out in these series of postings) were clearly prescient and correctly understood the dynamics that drive our industry.

Drew
dljvjbsl 12/5/2012 | 3:09:41 AM
re: RHK: Rest in Pieces
When did Ross Healey said that though? It seems that everyone was still promoting the industry up till Q'1-2001 even though some did realize that the UUNET data were pretty skewed, back in August 2000 when the carriers- especially the Service Providers were lowering their purchases and some sales people knew that revenues would not be as forecasted.


Healey was saying it through the entire Nortel run up. This was certianly long before 2001 or even 2000. It is just that nobody would listen to him. He correctly saw that there was no value in the Nortel optical strategy.
Scott Raynovich 12/5/2012 | 3:09:43 AM
re: RHK: Rest in Pieces Drew,

I kind of disagree with your "November, 2000" line in the sand.

People kept doing more and more stupid stuff right on through the end of 2002 -- possibly even into 2003 -- when I think the psyche of the industry may have bottomed.

Shouldn't folks get credit for how quickly they realized they were doing/saying stupid stuff?

Some people never admitted they did, wrote, or said one stupid thing during the mania. I admit to doing some or all of it. But at least I admit it.

And if you're looking for folks who were correct pre-crash, two (more general) analysts I have seen who consistently called the peak in all the bubble/mania including telecom is the hedge fund manager Bill Fleckenstein, who called the top of the Nasdaq stock market almost to the exact day, and stock-market advisor Michael Belkin.

Here is what Belkin wrote in March, 2000:

"The fraud component of the current speculative mania consists of this: Unprofitable companies are unsuitable investments for all but the most reckless of investors -- and fund management companies which lower their standards and pack their portfolios with shares of such money-losing companies are violating their fiduciary responsibilities to their shareholders.

"That's an easy line to cross when the entire financial industry is urging such behavior and the stock charts of such entities are soaring. But the end of that game is approaching and fund managers will ultimately be left holding such shares in a plunging, no-bid environment. And public sentiment (as it always does after a collapse) will blame the financial industry for improper investments in the unprofitable and unproven companies. Such is the glorious future of the Iridium Internet market."

Source: Fleckensteincapital,com (a for-pay site)

Impressive stuff, no?

For the record, Fleckenstein and Belkin are both predicting another macroeconomic setback when the bubble in government credit and housing burst.

I used to write a stock market column at the time (I was writing at Red Herring, of all places, during the mania), and I still think back on how right these guys were.

--Scott
Drew Lanza 12/5/2012 | 3:09:44 AM
re: RHK: Rest in Pieces There are a couple of different things going on here, so let's try to sort them out.

First, there's the accuracy of all these forecasts everybody produced. brookseven is spot, dead on when he writes:

"We have a lot of analysts who are great at linear prediction of the future based on the past. The issue is that we are in our 5th year of massive disruption. This makes the work of analysts almost useless."

The second issue relates to who really saw the downturn coming. I'll tell you this. Anyone who 'predicted' it after early November of 2000 doesn't get any credit. That's when Nortel's bubble first burst and that's when most of us in the industry realized that the ride was ending. Go look it up.

I think the final point relates to egregious behavior, of which there was much. But I'll defend the RHK folks, including John Ryan, on this front. I do not doubt that they could be arrogant and wrong. Show me an analyst in any booming industry who isn't. My point was that, in the main, they were decent hard-working folks trying to provide a valuable service. My interactions with them were always friendly and cordial, although we disagreed frequently on the analysis.

Finally, it is very, very important to remember that the final chapter of the story was not an inevitability based on all that had come before. Had the government made a couple of smart moves, they could have minimized the disruption.

Certainly, the governments in Korea, Japan and some European countries got in tune with the technology wave and they have quantifiably benefitted from having a far better broadband infrastructure than we have here today. And, no, that doesn't mean I'm not a capitalist. We would not have universal penetration of telephones, water, electricity, or roads if the government had not forced it to be so.

As I look back on the past 20 years I can find fault with all of the players: the carriers, the manufacturers, the analysts, the bankers, and the government. But far and away the most incompetent and unethical in this group were our elected representatives who meddled in an almost random way with our industry and, to this day, have no clue and no vision about our communications future.

Drew
dwdm2 12/5/2012 | 3:09:44 AM
re: RHK: Rest in Pieces An interesting story on what credit/blames Greenspan gets on the bubble. Enjoy.

http://www.wsws.org/articles/2...

The stock market bubble and Mr Greenspan
By Nick Beams
18 September 2002


As the after-effects of the collapse of the stock market bubble flow through the US and global economies with warnings of a Japanese-style stagnation no longer uncommon, the role of Federal Reserve Board chairman Alan Greenspan has come under closer scrutiny.

Faced with the criticism that he should have been aware that a financial bubble was in processGat least from the time he made his famous statement about the Gǣirrational exuberanceGǥ in December 1996GGreenspan sought to justify his actions at this yearGs annual financial symposium held in Jackson Hole, Wyoming, at the end of August.

The thrust of his argument was two fold: first, it was impossible to tell if a bubble was in formation and secondly, even if the Fed had known, there was nothing that could be done about it.

The existence of the bubble was clearly evident from figures available at the time. As Greenspan himself noted, between 1995 and 2000 the price-earnings ratio of the S&P 500 index rose from 15 to nearly 30. To attribute such an increase entirely to an increase in earnings Gǣwould require an upward revision to the growth of real earnings of 2 full percentage points in perpetuity.Gǥ

Seeking to deflect his critics, Greenspan told the symposium that, Gǣthe struggle to understand developments in the economy and financial markets since the mid-1990s has been particularly challenging for monetary policymakers.Gǥ They were Gǣconfronted with forces that none of us had personally experiencedGǥ and aside from the recent experience of JapanGthe collapse of the share market bubble after 1989GGǣonly history books and musty archives gave us clues to the appropriate stance for policy.Gǥ

He said that while the Fed had considered a number of issues related to asset bubbles, as Gǣevents evolved, we recognised that, despite our suspicions, it was very difficult to definitively identify a bubble until after the factG that is, when its bursting confirmed its existence.Gǥ

However, as a number of GreenspanGs critics have pointed out, the minutes of the Federal Open Marketing Committee (FOMC) tell a different story. At the FOMC meeting of September 24, 1996 Greenspan recognised that Gǣthere is a stock market bubble problem at this point.Gǥ

In his Jackson Hole address, Greenspan insisted that even if a bubble had been identified it was far from obvious that it could have been pre-empted Gǣshort of the central bank inducing a substantial contraction in economic activityGthe very outcome we would be seeking to avoid.Gǥ

Moreover, from recent experience, he continued, it seems that there is no low-risk, no low-incremental monetary tightening that could reliably deflate a bubble, nor even a policy that could Gǣat least limit the size of the bubble and, hence, its destructive fall out.Gǥ

In seeking to defend his role, Greenspan went further than he might have intended. His comments amount to an admission that those in charge of the Gǣfree marketGǥ are powerless in the face of economic and financial processes that have wiped out the life savings and destroyed the retirement plans of millions of people.

Furthermore, the clear implication of his remarks is that if it is not possible to limit the financial bubble and its GǣdestructiveGǥ effects, then it is not possible to initiate policies to overcome the economic stagnation following its collapse. That is certainly the experience of Japan over the past decade where a program of zero interest rates and the greatest expansion of government spending in history has failed to restore consistent economic growth.


Continuing criticism

GreenspanGs attempts to free himself from blame have not cut much ice with his critics.

Writing in the Financial Times of September 3, Stephen Cecchetti, a research associate at the National Bureau of Economic Research and director of research at the Federal Reserve Bank of New York between 1997 and 1999, asked why, given the damage they cause, did Greenspan and the Federal Reserve Board deny that trying to head off asset bubbles and their Gǣdisastrous consequencesGǥ was in their department.

As Cecchetti pointed out, the overall cost of the bubble is Gǣseveral percentGǥ of US gross domestic product and Gǣstill counting.Gǥ GǣWhen faced with the potential for output losses of this size, central bankers usually work to try to minimise the damage. So why, when faced with strong evidence of a bubble, do they react so differently?Gǥ

An editorial published in the Financial Times of September 14, under the headline GǣMr GreenspanGs tarnished legacy,Gǥ noted that the FOMC transcriptsGthe latest available under a five-year publication delay ruleGshowed that far from not being aware of their existence, the Fed chairman was Gǣhappy to talk about bubbles and the means of pricking themGǥ.

The editorial went on to point out that after his brief warning in December 1996, Greenspan waxed enthusiastic about the Gǣnew economyGǥ until in 2000 he Gǣregularly talked of a Gonce in a century acceleration of innovationG, a Gpivotal period in American economic historyG, where GI see nothing to suggest these opportunities [of high rate of return productivity enhancing investments] will peter out any time soon.GGǥ

Morgan Stanley chief economist Stephen Roach, in a recent comment entitled GǣThe Great Failure of Central Banking,Gǥ also pointed out that it was not just policy accommodation that Gǣnurtured the excesses of AmericaGs asset bubble.Gǥ

GǣThe rhetorical flourishes of Chairman Greenspan took perceptions of the New Era to an entirely different level. He became almost evangelical in his passion. In a January 2000 speech before the Economic Club of New York, he maintained that Gthe American economy was experiencing a once-in-a-century acceleration of innovation, which propelled forward productivity, output, corporate profits, and stock prices at a pace not seen in generations, if ever.GGǥ

GreenspanGs critics are able to expose his claims that he was unaware of the development of the financial bubble, and his role in fostering its growth, but they make no assessment of why it was that the Fed chairman, who had responsibility second to none for the functioning of the US economy, refused to act against the financial disaster in the making.

The reason is not to be found in GreenspanGs lack of knowledge but in the deep-going structural changes taking place in the US economy at this time. These changes were the subject of an article in the magazine Foreign Policy published in 1996, just as the bubble was starting to inflate.

GǣSecuritisationGthe issuance of high-quality bonds and stocksGhas become the most powerful engine of wealth creation in todayGs world economy,Gǥ it declared, noting that securities were worth more than the worldGs output of goods and services and would soon be worth more than two yearsG output.

In the past, it pointed out, when wealth creation was bound up with manufacturing, exporting and direct investment it proceeded relatively slowly. But now it was possible through financial measures to create wealth quickly. This Gǣnew approachGǥ meant that Gǣa state had to find ways to increase the market value of its assetsGǥ. Consequently Gǣan economic policy that aims to achieve growth by wealth creation therefore does not attempt to increase the production of goods and services, except as a secondary objective.Gǥ


The origins of the bubble

While this characterisation did not provide an analysis of the origins of the bubble, it was an accurate depiction of its impact on policymaking.

The key to this analysis lies in an understanding of the contrast between the rapid growth in financial markets and the relatively slow growth of the real economy to which the Foreign Policy article pointed.

While the various Gǣfinancial innovatorsGǥ saw the creation of new forms of wealth as the outcome of their activities, it was, in fact, an expression of a deepening crisis within the capitalist economy.

Inasmuch as profit rates were starting to decline and overcapacity was developing in the key sections of industry, large masses of investment funds could not find profitable outlets in the expansion of industry and so turned to the financial markets. As long as money kept coming into these markets it was possible to rapidly expand wealth through the buying and selling of financial assets.

The creation of an ever-larger mass of fictitious capital, and the increasing importance for the functioning of the US economy, saw the growth of a new financial elite whose wealth and power was rooted in the financial bubble. Wielding considerable influence, it was more than prepared to mount a political struggle against any measures it regarded as inimical to its interests.

The growth of this stratum can be seen in the figures on the distribution of wealth flowing from the stock market boom. It is estimated that of the stock market gains between 1989 and 1997, around 86 percent went to the top 10 percent of households, while just over 42 percent went to the top 1 percent.

Detailing this process in his book Wealth and Democracy, Kevin Phillips writes: GǣThe upthrust of the largest US fortunes principally reflected gargantuan increases in stock market valuations, especially technology holdings. Of the top thirty fortunes of autumn 1999, eight were new money, mostly first-generation, in the computer, software, cellular, and Internet sectors. Eight others fell into the related media and entertainment fields; many were second and third generation. Parenthetically, of the entire Forbes 400, 140Ga full 35 percentGrepresented technology in some formGǥ [p. 111].

According to Phillips, the 400 richest Americans increased their average net worth from $230 million in 1982 to $2.6 billion by 1999Ga rise of 500 percent in constant dollars, while the entire top 1 percent, over 1 million families, gained around 75 percent in real terms over the same period.

Other figures show that the growth of inequality proceeded at such a rapid rate that in 1999 the top 2.7 million, or 1 percent, had as much after-tax income as the bottom 100 million. Between 1997 and 1999 their income had increased by 119.7 percent, from $234,700 to $515,000 while over the same period the income of the middle one-fifth of the population declined by 3.1 percent, from $32,400 to $31, 400. [See Wolman and Colamosca, The Great 401(k) Hoax p. 89]

It was this financial aristocracy, whose wealth had been boosted in such large part by the share price spiral, which insisted that nothing be done to deflate the bubble. As part of this financial elite, Greenspan did not take much convincing that it was far better to sing the praises of the Gǣnew economyGǥ than take action to combat the mounting problems it was creating.

When he did move to marginally tighten interest rates in 1997, Greenspan was faced with a Gǣtorrent of political criticism for tampering with the democracy of the markets.Gǥ Under these conditions Gǣthe so-called independent central bank did an about-faceGǥ. Any further tightening was shelved, and the bubble took on a life of its ownGǥ [Roach, The Great Failure of Central Banking].

The whole experience has far-reaching political implications. It is a first-hand lesson in the political economy of social inequalityGa demonstration that there can never be any real democratic control of the economy without the establishment of genuine social equality. This means overturning the present economic order in which a tiny financial elite is able to increase its wealth at the expense of the livelihood and future of hundreds of millions of ordinary working people and establishing an economic system based on social ownership, control and democratic planning.

See Also:
Is the US economy heading into deflation? http://www.wsws.org/articles/2...
[29 August 2002]
Greenspan knew share market boom was a financial "bubble" http://www.wsws.org/articles/2...
[5 March 2002]

dwdm2 12/5/2012 | 3:09:45 AM
re: RHK: Rest in Pieces "If the same technology is available to all, how does one explain the discrepancies?"

rjmcmahon, you do have a point here. Before I can comment, however, I need to educate myself about if the above is true. There are competing technologies available. I'd like to learn what technologies Hong Kong or Japan uses for their Gbs connections. Are they offering to homes directly on Fiber? What kind of computer the end users have to utilize this Gbs signal and what technology enables such use? (forgive my ignorance).

"These observations suggest something other than technology is holding back our..."

My only point is an appropriate technology (i.e., one that is available, cheaper, easily deployable and maintainable, etc.) can alleviate/remove other hurdles.
deauxfaux 12/5/2012 | 3:09:45 AM
re: RHK: Rest in Pieces Well, we couldn't disagree more. Through many personal interactions, I found that John and his crew were incredibly arrogant, and that most of what they said was useless.

Your point that he was just the messenger doesn't wash either. These guys produced "research" which they touted as being the best in the world, at very high prices. For $35,000 a year per track, I would expect that they hold themselves accountable for the accuracy of their data and conclusions

"Experts talking to Experts" if I remember right

Hardly
deauxfaux 12/5/2012 | 3:09:45 AM
re: RHK: Rest in Pieces Dead right you are....this nonsense went on all of the time with public and private companies.

The public markets ate this stuff up as fact and moved stock prices because of it.

VCs wouldn't even look at other market research. RHK and its principals were brought into a lot of deals because of what they said......or didn't
Scott Raynovich 12/5/2012 | 3:09:46 AM
re: RHK: Rest in Pieces Hey, while we're using this to toot our own horn, I thought I'd point out to a specific 2001 Optical Oracle report (OO is now known as Light Reading INsider) that said capex would declie through 2005, at which point it would start to rebound.

From November, 2001, Optical Oracle (Light Reading Insider):

"Carrier capital spending has not yet hit bottom. It will continue to deflate for the foreseeable future, starting with a sizeable dip from current levels in 2002.

"So says the latest report from the Optical Oracle, Light ReadingGs subscription service. Titled GǣCarrier Capital Spending: Past, Present, and Future,Gǥ the report looks at how carrier spending on equipment increased 250 percent from 1997 to 2000, what slammed on the brakes, and what it will take for spending patterns to show significant growth once again.

"Based on feedback and financial data from 11 top carriers, the report concludes that carriers, which expanded their capital spending far more quickly than their revenues and profits, have no choice but to cut back. For 2001, carrier capex is poised to decline 16 percent from the previous year, and based on early forecasts from the carriers it will decline another 35 percent in 2002. After that, expect declines of 10 percent per year through at least the next three years, the report says."
Kevin Mitchell 12/5/2012 | 3:09:46 AM
re: RHK: Rest in Pieces Larry333 makes an excellent point about forecasters being wrong, but the reasons behind them being less than genuine. Big numbers get the attention and customers of marketing people.

Also, let's keep in mind that there were and are still smart analysts with integrity from RHK like Teresa M. and Mark S.
dljvjbsl 12/5/2012 | 3:09:47 AM
re: RHK: Rest in Pieces Ross Healey, a Canadian stock market analyst, was saying the same thing about Nortel. He was advising anyone who would listen that the optical market was grossly over built and that they should not buy Nortel. He was predicting that the Nortel share price would fall to the one dollar region when it was priced at over $100 Canadian. He was saying that there is 15 years worth of optical bandwidth growth already bult and in the ground.

For the recrod, he says that Nortel is still overprieced and expects it to fall back to under $2 per share (CDN)
dodo 12/5/2012 | 3:09:47 AM
re: RHK: Rest in Pieces dljvjbsl

When did Ross Healey said that though? It seems that everyone was still promoting the industry up till Q'1-2001 even though some did realize that the UUNET data were pretty skewed, back in August 2000 when the carriers- especially the Service Providers were lowering their purchases and some sales people knew that revenues would not be as forecasted.
paolo.franzoi 12/5/2012 | 3:09:47 AM
re: RHK: Rest in Pieces
We have a lot of analysts who are great at linear prediction of the future based on the past. The issue is that we are in our 5th year of massive disruption. This makes the work of analysts almost useless.

seven
DZED 12/5/2012 | 3:09:47 AM
re: RHK: Rest in Pieces "Unless end users in aggregate spend significantly more each year on communications, the optical backbone is a busted flush.Gǥ

Exactly, other threads having been thrashing this argument. Its simple supply and demand. In the end the consumer has to pay somehow.

Its a shame no-one saw through it at the time, either they were too dumb or didn't want to.

Who is the crook, the person who produces bogus data or the person who uses it to fool investors knowing its bogus?

And how could the supposedly smart, highly paid investment analysts get it so wrong? Or was it because they were all getting a cut of the action?
Peter Heywood 12/5/2012 | 3:09:48 AM
re: RHK: Rest in Pieces It's worth pointing out that Heavy Reading's Graham Finnie was saying negative things about optical networks (and getting flak for it) early on.

Here's an excerpt of an article on Europe's fiber boom that Graham wrote in 1998, for the magazine Tele.com:

"Is there really room for so many companies, all battling for a piece of the bandwidth action? Even the poorest quality fiber in the ground can carry at least 10Gbps per fiber pair. New fiber can carry 300-400Gbps per fiber pair using dense wavelength division multiplexing, and will likely be able to carry 1Tbps per pair by 2001. Now multiply that by 50, 100 or more pairs per major route and the stats begin to boggle the brain. Yet total usage today is a vanishingly small fraction of that. Even on the most wildly optimistic view of the impact of competition, supppressed demand and the likely direction of prices (down, and very fast), it's hard to see any other scenario but a lot of spare capacity lying around that is, at least theoretically, in play.

From the point of view of entrants, that could mean trouble if strategy isn't sharply focused."

And here's an excerpt of a presentation that Graham gave at Light Reading's Opticon conference in 2001:

"Unless end users in aggregate spend significantly more each year on communications, the optical backbone is a busted flush.Gǥ
Peter Heywood 12/5/2012 | 3:09:48 AM
re: RHK: Rest in Pieces It's worth pointing out that Heavy Reading's Graham Finnie was saying negative things about optical networks (and getting flak for it) early on.

Here's an excerpt of an article on Europe's fiber boom that Graham wrote in 1998, for the magazine Tele.com:

"Is there really room for so many companies, all battling for a piece of the bandwidth action? Even the poorest quality fiber in the ground can carry at least 10Gbps per fiber pair. New fiber can carry 300-400Gbps per fiber pair using dense wavelength division multiplexing, and will likely be able to carry 1Tbps per pair by 2001. Now multiply that by 50, 100 or more pairs per major route and the stats begin to boggle the brain. Yet total usage today is a vanishingly small fraction of that. Even on the most wildly optimistic view of the impact of competition, supppressed demand and the likely direction of prices (down, and very fast), it's hard to see any other scenario but a lot of spare capacity lying around that is, at least theoretically, in play.

From the point of view of entrants, that could mean trouble if strategy isn't sharply focused."

And here's an excerpt of a presentation that Graham gave at Light Reading's Opticon conference in 2001:

"Unless end users in aggregate spend significantly more each year on communications, the optical backbone is a busted flush.Gǥ
Peter Heywood 12/5/2012 | 3:09:48 AM
re: RHK: Rest in Pieces This discussion over whether RHK had malign intent with some of its forecasts has reminded of what it used to do with its DWDM market share numbers.

It used count in all the Sonet/SDH equipment that incorporated DWDM modules, and then provide a suitable quote for Nortel to issue a press release crowing about being the DWDM market leader, largely on the back of its big success in the 10 Gbit/s Sonet/SDH market.

I know this used to REALLY annoy Ciena, because this meant it never really stood a chance of having its market position in the pure DWDM market recognized.

To me, the whole thing made RHK look more like a fancy PR outfit than a market research company.
rjmcmahon 12/5/2012 | 3:09:49 AM
re: RHK: Rest in Pieces I don't usually like to post, because random people flame me and insult my mother and that just gets me all worked up over nothing.

Well thank you (and to your mother) for responding to my question. It was helpful.
rjmcmahon 12/5/2012 | 3:09:49 AM
re: RHK: Rest in Pieces I don't know what you meant by "our industry" but technology play an important role in All industry.

dwdm2; I'm referring to the communications industry, machine/machine, person/person, etc. Agreed that technology and innovation plays an important role in all industries.

If a technology industry is held back for several reasons, 'technology' itself is always a common factor.

If the same technology is available to all, how does one explain the discrepancies? The US is something like 14th in the world in broadband connections and trending downwards. Hong Kong offers 1Gbs access links to residences while Manhattan does not. Japan offers 100Mbs at very reasonable rates and also has adopted IPv6. These observations suggest something other than technology is holding back our communications industry and everything else that is dependent upon a modern communications infrastructure.

So a statement like "technology is not the main reason that xyz industry is held back" or a variation of such would've been more agreeable. ;-)

Fair enough, though I don't know if being agreeable necessarily helps motivate the group towards desirable outcomes. Many times it does just the opposite. For more on that

http://allpsych.com/psychology...

If you've ever been involved in a group decision making process, you've probably seen one of two things happen: either the group agrees on all of the major issues, or there is significant dissent that splits the group. If the group is cohesive; if they agree on most issues, they tend to stifle dissent because group harmony is the anticipated outcome (Janis, 1972). When we all agree, and are happy with that agreement, we typically do not want to hear opposing arguments. This phenomenon is referred to as Group Think. It can lead to impulsive decisions and a failure to identify and/or consider all sides of an argument. Some classic examples of group decisions going bad include lynch mobs, actions of the Ku Klux Klan, discrimination among hate groups, and mass riots.
fgoldstein 12/5/2012 | 3:09:51 AM
re: RHK: Rest in Pieces I didn't know Ryan, and I didn't subscribe to RHK, but I was certainly observing the boom from an interesting vantage. If his forecasts were half as bad as people here say they were, then they were right there with a lot of other "analysts" who helped investors lose sagans (billions and billions) of dollars.

In 1998, I joined the venerable (world's oldest) consulting firm, the now-late-lamented Arthur D Little Inc. It was less IP-centric than my previous post at BBN/GTE, and more concerned with industry finances. I was in a small group of technical people who knew enough about business to spot the loony, and that's what we often did. In 1998-1999, potential investors brought us a lot of proposals for new networks. Many of them were driven by the same basic meme, that the Internet was doubling every hundred days or so. Extrapolated out a decade, the backbone fiber just then being activated by Qwest, Level 3, Williams, etc., was going to fill up, and the oceans were almost virgin turf. Apparently there were plenty of "analysts" and "forecasters" willing to sell such opinions to operators who needed something to foist on investors.

As a group, we were having none of this. Well, one senior guy in the group, a Bell veteran, believed a lot of it, but the rest of us tended to laugh. They want to invest how much in WHAT? (Chortle, chortle.) It reminded me of the rate at which cockroaches multiply. Supposely they can lay eggs so fast that within weeks, a few of them will grow to be two feet deep on the floor. If nothing stops them, which it always does. Cockroaches only have so much food, and that limits them.

We tended to make some clients unhappy, at least for the short term, by telling them that the boom wasn't sustainable. And some big proposed investments didn't happen. But we ADLers weren't the only ones who knew that the Worldcom doubling claim was bull-hockey. Lots of smart money stayed away. Remember Warren Buffet? Fast growth rates are not sustainable.

By 2000 or so, UK-based IT news site The Register was busy telling "tales of the bubble economy". We were counting down bankruptcies. We waited for the meltdown to happen, and it did. Alas, ADL itself melted down, for totally unrelated reasons (telecom was only a small part of its business), and a lot of us set up our own shops, like my Ionary. And at least I was able to get something out of that era by writing my book The Great Telecom Meltdown about events I had watched from a front row seat, but happily not from inside the ring.
larry333 12/5/2012 | 3:09:51 AM
re: RHK: Rest in Pieces Drew:

I largely agree. I met a lot of RHK analysts and some of its management over the years and i thought that -- even though they were my competitors at the time -- they were a pretty good/intelligent bunch. I went on to employee at least one ex-RHK guy. To suggest that they were evil is obviously infantile. That term should be reserved for the folks who ran WorldCom, Enron, etc. Perhaps not even for them.

That said, many of the forecasts that came out of RHK during the boom period seemed to run counter to what a little fact checking with the service providers would have revealed about actual deployment plans. So there is some good reason to suppose incompetence or deviousness on the part of at least some folks at RHK.

L
Drew Lanza 12/5/2012 | 3:09:52 AM
re: RHK: Rest in Pieces I often follow the same logic that you do. When something or someone screws something up I assume it had to be either mischief or incompetence.

And I would agree that both of those factors were heavily at work here. But not in the predominance at RHK.

Rather the mischief was with some of the large companies and some of their bankers. And the incompetence was with our government.

Perhaps RHK should have seen through those two veils sooner than they did. That would make a fair criticism.

But it's interesting to note that only now are the trials of the CEO's who swindled our industry reaching their sentencing phases. It's turned out to be a very tough thread to unravel.

Drew
Drew Lanza 12/5/2012 | 3:09:52 AM
re: RHK: Rest in Pieces Peter:

Good point. Light Reading really isn't in the business of making forecasts. But it certainly is in the business of making predictions - and that's often just as dicey as making forecasts.

You guys are great! One of the reasons I was drawn 20 years ago to the telecom industry was that people thought interesting thoughts and dreamed big dreams. Thank you for continuing to stir this pot of stew.

And now we talk about half of the people on the planet having a cell phone sometime in the next decade. Can that actually be right? Wow.

Even after all of the turbulence and disappointment over the past 5 years, that's a notion that gets me as excited as anything I've been involved with over the past 20 years (and believe me, like many of the rest of you, I've been on the ground floor of some very, very cool technologies, projects, and products).

I was there when they formed RHK. Many of the players came out of Raynet. They were (and are) solid citizens. Peter Hankin and Linda Seale are two of the nicest people I've ever met (and two of the smartest!). Claude Romans knew this industry as well as anyone I'd ever met. And guys like Leif Hoglund were dreamers and visionaries of a rare vintage.

I think it's ok if people want to tear them down because they failed. People tear me down for that all of the time. It hurts. But it's fair.

But let's not accuse them of being evil. They're not. And let's not accuse them of destroying this industry we all love. They didn't.

They are, in the end, just the messengers.

Drew
larry333 12/5/2012 | 3:09:52 AM
re: RHK: Rest in Pieces But the claim is not that RHK got it wrong -- no forecasts are 100 percent accurate even in physics.

The claim is that either RHK (1) deliberately came up with forecasts designed only to hype the market or (2) were incompetent forecasters. One of these two (or perhaps both) must have been the case. Because the truth was out there even at the time.

bithead_22 12/5/2012 | 3:09:53 AM
re: RHK: Rest in Pieces P. Heywood wrote:

"Light Reading never has got into the forecasting business. All we've done is report other folk's forecasts and occasionally made fun of them when they were clearly ridiculous, as some of RHK's were."

So will this change now that LR is in the paid research business?

I mean, it's very convenient to say "roadms or pseudowires or ip tv is revolutionizing telecom" then balk at making a hard, quantifiable prediction.

Should be quite interesting to see whether HR takes this step. It will be even more interesting to see how LR responds if/when one of the analysts get it wrong.
Peter Heywood 12/5/2012 | 3:09:54 AM
re: RHK: Rest in Pieces I'm pleased to see you posting, too, Drew. You always have something interesting to say.

I would take issue with one thing you said; Light Reading never has got into the forecasting business. All we've done is report other folk's forecasts and occasionally made fun of them when they were clearly ridiculous, as some of RHK's were.

rjmcmahon 12/5/2012 | 3:09:54 AM
re: RHK: Rest in Pieces Drew, nice post. It's good to hear from you again. I agree that our industry has been held back and it's not because of technology.

A question I have is why haven't any investors stepped up to the plate and started buying the municipal bonds, restarting some of the stalled municipal projects? It seems like if a few of those projects proved a viable model than others would follow. Any thoughts and opinions on what is holding that back?
dwdm2 12/5/2012 | 3:09:54 AM
re: RHK: Rest in Pieces "I don't usually like to post, because random people flame me and insult my mother and that just gets me all worked up over nothing."

I actually called for your absence ;-)

http://www.lightreading.com/bo...
dwdm2 12/5/2012 | 3:09:54 AM
re: RHK: Rest in Pieces "I agree that our industry has been held back and it's not because of technology."

rjmcmahon, I had hoped that you'd not get started on this again... I don't know what you meant by "our industry" but technology play an important role in All industry. If a technology industry is held back for several reasons, 'technology' itself is always a common factor. So a statement like "technology is not the main reason that xyz industry is held back" or a variation of such would've been more agreeable. ;-)

I agree with Drew's statement that "In the end, this industry is almost impossible to forecast. That's because it's always been (at least in the 20 years I've been involved) a lot more political than technological."

Flame invited
Drew Lanza 12/5/2012 | 3:09:54 AM
re: RHK: Rest in Pieces rj:

I don't usually like to post, because random people flame me and insult my mother and that just gets me all worked up over nothing.

There's actually a huge amount of activity going on right now in upgrading our infrastructure to handle broadband.

I know that Wave7, one of our portfolio companies, is selling a ton of FTTH gear. And all the signs are that Verizon is putting its money where its mouth is and deploying billions of dollars worth of cable and accessories in advance of real mass deployment of FTTX.

I also hear that BellSouth and SWBT are installing lots and lots of new DSL lines and will soon be able to serve DSL to pretty much all of the customers in their serving areas.

We also see a lot of new technologies every day that promise to either up the bit rate over copper or lower the cost of broadband over fiber.

It looks like it's finally happening here. But, as I said in a column on Light Reading last year, it's mostly happening at the greenfield + rehab rate and not at the more ambitious overbuild rate (although Verizon may be the exception). But either rate will get most homes passed by optical broadband by 2020 and by copper broadband in the next year or two.

I don't follow the munis closely, so I don't know what the story is there. I've always been a huge fan of the munis and the small and medium sized independents. About 15 years ago I had the great pleasure of being the keynote speaker at the Louisiana Telephone Association's Annual Meeting. It was an eye-opener. The small Independents are far and away the most sophisticated operators out there and deploy new technology years ahead of the RBOC's.

Drew
larry333 12/5/2012 | 3:09:55 AM
re: RHK: Rest in Pieces . . . and then again there are those of us who prefer integrity in both our presidents and our forecasters.
deauxfaux 12/5/2012 | 3:09:56 AM
re: RHK: Rest in Pieces Unfair? Hardly. I've been listening to John at Startrax and OFC executive forums. The only hypester of similar size was/is Gilder himself.

IMO, Peter should have let Larry write the article
Peter Heywood 12/5/2012 | 3:09:56 AM
re: RHK: Rest in Pieces On desikar's comments, let's take a case in point:

March 6, 2000:

Xros OFC press release in which John Ryan is quoted extensively saying carriers are "desperate" for huge crossconnects like Xros's:

http://www.lightreading.com/do...

March 14, 2000 (8 days later)

Nortel buys Xros for $3.25 billion in stock and LR suggests that it's paying "too much for too little"

http://www.lightreading.com/do...

April 21, 2000

LR runs story headlined: Xros's OFC Splash Was All Wet

http://www.lightreading.com/do...

March 5, 2002

LR runs story saying Nortel has ceased work on Xros technology

http://www.lightreading.com/do...

Who was it who went ga-ga over startups?
Drew Lanza 12/5/2012 | 3:09:56 AM
re: RHK: Rest in Pieces I've had the pleasure of knowing John Ryan for almost 20 years now and I'll step up to defend him.

RHK and Light Reading both provide a valuable service that was sorely lacking in the late 80's and early 90's.

If you wanted to find out what was going on in the industry you either had to do it yourself or pay some really high priced consultant whose numbers weren't any better than RHK's or Light Reading's.

I'm a big fan of John's, of RHK's and also a big fan of the guys (and gals) at Light Reading. And, like all of you, I've lost plenty of money staying in this industry.

RHK and Light Reading stimulate the debate and create connections throughout the industry.

So their forecasts are wrong? Whose aren't?

In the end, this industry is almost impossible to forecast. That's because it's always been (at least in the 20 years I've been involved) a lot more political than technological.

It's not an accident that the countries with the highest penetration rates of broadband are those where the government has said 'make it so'. And we didn't get mass penetration of phones, water, electricity, or roads until the government fiat, either.

Had our government been less concerned with Bill Clinton getting his weenie waxed and more concerned with maintaining its leadership role in the Internet we might not have had a meltdown. In any event, it would not have been as severe.

So I guess we should all blame the forecasters for not predicting that Bill Clinton had needs or that knuckleheads would fly planes into buildings or that the people at the heads of some of our largest telecom companies were out and out crooks. Let alone they didn't forecast how absolutely clueless our elected officials were and are.

John Ryan certainly was the messenger and you've all certainly shot him. But he didn't cause the collapse. And my recollection matches one of the other posts here that that he was an early doomsayer (just as he was an early prophet).

And John's a good-natured guy. I once introduced him to a roomful of senior industry executives as "That buttmunch, John Ryan". He got a good, long laugh out of as did the rest of the crowd.

I look forward to the crucifiction that will inevitably follow the post. I'm soon to remember why I keep banging my head against the wall.

Drew
desikar 12/5/2012 | 3:09:57 AM
re: RHK: Rest in Pieces Believe that is an unfair statement about John Ryan....

It was John Ryan who in June 2000 at Supercomm first identified that the industry was topsy turvy in terms of capital expenditures. That, and the sound analysis of Andrew Odlyzko were the first portents that were credible.

If John (and many of us) had known that Worldcom was committing fraud in inflating Capex numbers (and UUnet was the bellwether), he would have likely brought this up even earlier.

What is sad that even after this realization at RHK, they were not able to transition the wisdom to their market projections which grew through Oct. 2000 (at least) before they started expressing doubt. Data driven analysis on both sides, but erroneous because of the misdirection in the industry and Wall street. We were too focused on using UUNet as the basis for the Internet and assumed that Worldcom was accounting appropriately.

People have been fired at AT&T for not being able to match MCI in network performance and cost - the latter was all bogus, it turned out :)

Where was LR when John Ryan brought up the problem of Capex? Still going ga-ga over this startup or the next...

Sorry, Peter, the tone of the article is a bit self-serving and an unfortunate choice.

desikar
dodo 12/5/2012 | 3:09:57 AM
re: RHK: Rest in Pieces "It was John Ryan who in June 2000 at Supercomm first identified that the industry was topsy turvy in terms of capital expenditures. That, and the sound analysis of Andrew Odlyzko were the first portents that were credible"

I beg to differ. If anyone recalls, it was Bob Metcalfe who predicted the burst of the bubble at Supercomm 1999. He did not agree with the data and forecast he was seeing in the different media.It was during a luncheon presentation. I remembered(this has been mentioned before on this site) that there were some VCs and analysts at the table i was sitting at. While I was pondering at what he was saying, my neighbours were laughing and were very amused by his arguments.

Guess we know who has the last laugh..........
Stevery 12/5/2012 | 3:09:59 AM
re: RHK: Rest in Pieces DZED: Everyone in the UK would have to hand over more than their entire disposable income to meet the growth projections for telecoms from RHK. (OK I made that up)

This made me laugh. Making up numbers is befitting to RHKs epitaph, no? So that makes me want to give you points. But in order to get full points you must omit telling us that you made them up.

larry333 12/5/2012 | 3:10:00 AM
re: RHK: Rest in Pieces . . . many of the firms that are now griping about RHK numbers have only themselves to blame. There were other -- more realistic -- numbers out there including data from the firm I head. It wasn't hard to get such data. All you really had to do was go ask the service providers what their actual plans were.

We did O.K. during the optical boom era. But it was interesting how some people treated RHK data with religious fervor. (They would have done better with the real thing.) In one case, I remember being told that our modest forecasts for DWDM couldn't be correct, simply BECAUSE RHK's numbers were so much bigger. Others were more cynical. One company (now long gone) used our numbers internally and then used RHK numbers in press releases.

The truth is that many optical era executives didn't want to admit that they were in a bubble and they were looking for some independent verification. There was always going to be someone who would step up and give them what they needed. And telecom used to be such a nice little industry . . .
DZED 12/5/2012 | 3:10:02 AM
re: RHK: Rest in Pieces Just FYA, I think all of Bookham's 'strategy' was based on RHK figures. I may even have some of the PPTs somewhere.

I always though it amusing to back calculate some of their figures.

eg Everyone in the UK would have to hand over more than their entire disposable income to meet the growth projections for telecoms from RHK.
(OK I made that up)
deauxfaux 12/5/2012 | 3:10:04 AM
re: RHK: Rest in Pieces I remember the smell of BS permeating the first Startrax that I ever attended. John Ryan was holding court with some of the smartest VCs in the business and they were buying the whole line of garbage. One of them confessed to me later that he didn't buy any of it, but was completely intimidated by the other guys that supposedly "got it." He claims that it was the biggest mistake of his career.

The emperor had no clothes indeed

OpticOm 12/5/2012 | 3:10:05 AM
re: RHK: Rest in Pieces I remember the good old days, when at a certain start-up in the telco space, in 1999, we got a marketing report about the size of the crossconnect market (at least $7B in the report).
Being in engineering, I am not sure if the marketing guys based their strategy on that report, but it would not be unheard of.
In any case, the start-up crashed, like many others, and, looking back, that data was completely flawed...
paolo.franzoi 12/5/2012 | 3:10:05 AM
re: RHK: Rest in Pieces
Wow, DF you and I agree on another one.

My favorite response to RHK was, "If I based my business decision on what RHK said, then I wouldn't have a business."

seven
deauxfaux 12/5/2012 | 3:10:05 AM
re: RHK: Rest in Pieces John Ryan is the most arrogant guy in Telecom, which is absolutely amazing in light of the number of times that he was absolutely dead wrong. He hasn't had an original thought in his life, and all of the conventional wisdom that he espoused was backed up with double counting, weak minded BS.

More $100M startups were wrecked on the shoals of their BS than any other single factor.

At $1M, Ovum overpaid

paolo.franzoi 12/5/2012 | 3:10:08 AM
re: RHK: Rest in Pieces
I was hoping an arrogant *&^% like John Ryan would have gone jobless and then homeless.

:(

seven
dwdm2 12/5/2012 | 3:10:09 AM
re: RHK: Rest in Pieces "As a nod to RHK's role as one of the most entertaining prognosticators in the field, we'll predict that the two parts of RHK will each grow to become a $900 billion market -- a 4,550 percent increase -- by 2022."

How'd this be categorized? Just curious ;)
HOME
Sign In
SEARCH
CLOSE
MORE
CLOSE