What he means is that spending will return to the levels of, say, the third quarter of 2011. But even a normal spending level would be a relief to equipment vendors that saw fourth-quarter earnings torpedoed by service provider frugality.
Why this matters
Equipment vendors have been issuing bleak predictions about carrier capital expenditures, especially in North America and especially -- it's presumed -- for AT&T Inc. (NYSE: T). A return to normality would make for pleasantly surprising first- (or possibly second-) quarter earnings.
With that in mind, you have to consider it's possible that the companies are just sandbagging, trying not to look bad if capex doesn't rebound. Acme Packet Inc. (Nasdaq: APKT) officials practically admitted to lowballing their forecast, and it's possible that Juniper Networks Inc. (NYSE: JNPR) is doing the same, as analyst Brian Marshall of ISI Group Inc. speculated in a recent report.
AT&T and Verizon Communications Inc. (NYSE: VZ) hadn't finalized their budgets as of last week, which would be a legitimate reason for vendors to be cautious. Notter thinks AT&T has a healthy order backlog even on the wireline side ... but none of that is real until a budget gets approved. AT&T's budget might take a little longer than usual as the company erases T-Mobile US Inc. from its plans.
Some recent earnings results that cited weak capex, especially among North American carriers:
- Carrier Bug Bypasses Infinera, Bites Acme Packet
- Tellabs to Restructure, Cut 530 Jobs
- Juniper Points to the Economy
— Craig Matsumoto, Managing Editor, Light Reading