Depressed Outlook

3:45 PM -- Though it's probably not the best measurement, a quick look at what a consensus of Wall Street analysts are expecting for telco equipment companies in the first quarter of 2009 makes me feel like this whole depression thing is going to be here for a while.

The best-case scenario of the companies I picked shows only a 9 percent year-to-year revenue decline. Now that's not necessarily a sign that earnings will be horrible, or at least any worse than they were during the most recent quarter. But that is, collectively, a lot of revenue that will go missing from some of the sector's biggest names.

Table 1: Depressed Expectations
Company Expected Year-Over-Year Revenue Change for Q1 '09 (%) Share Price Change in 12 Months (%) Most Recent Earnings Report
Adtran -9% -27% Adtran Reports Q4
Alcatel-Lucent -19% -71% AlcaLu Ends 2008 With �5.2B Loss
Ericsson -15% -23% Ericsson Soars on Strong Q4, Outlook
Infinera -23% -50% Infinera Anchored by New Wins
Tellabs -22% -40% Tellabs Feels the Pinch
Source: Light Reading, Thomson Reuters, Google Finance

So carrier spending has slowed and is not expected to pick back up soon. And investors are as sour on the sector as ever. But I may as well ask: Does anyone see a silver lining in this cloud?

— Phil Harvey, Editor-in-Chief, Light Reading

vrparente 12/5/2012 | 4:12:23 PM
re: Depressed Outlook Yeah with those kind of vendors. If you are looking for who will do well in a tough market, don't look at the highest margin product vendors or at aging technologies. Look for cost effective Ethernet switching, routing, and CESR platforms that are cost effective. As business customers look for value they are going to let their T1 contracts expire and move to lower cost Ethernet based services over fiber (PON), cable (DOCSIS), and if it works over DSL. Look at the vendors in those space for better than expected results.
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