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Optical/IP

Still 'Short-Lived'

1:50 PM -- Ciena Corp. (NYSE: CIEN) CEO Gary Smith still sees the downturn as being "short-lived."

That's what he told us a month ago. (See Ciena CEO: Slowdown Looks Shortlived.) And he's telling it to Barron's now.

"The carriers cannot slow down spending for a protracted period of time," he's saying, sticking to his pre-bailout argument.

Is that true, though? Analysts including Mark Sue of RBC Capital Markets seem to be pulling back their forecasts, saying the crumbling economy will have operators putting network improvements on hold. Among the problems: Carriers, like everyone, will have limited access to capital.

Yes, they'll be forced to accommodate factors like increased broadband and mobile-data usage, but they'll do so less willingly. Buildouts won't stop, but they'll happen cautiously.

Keep in mind, Smith is using "short-lived" to mean multiple quarters. Moreover, there's an unproven suspicion out there that Ciena's troubles were caused mainly by AT&T Inc. (NYSE: T), so it's possible Ciena isn't seeing business slowing in the rest of its customer base.

Still, I'm not sure I agree with Smith, even if "short-lived" means a full year. Along similar lines, I wonder if Cisco Systems Inc. (Nasdaq: CSCO), even with its tempered outlook, has yet to see the worst of it. (See Cisco: Economic Troubles Aren't Over.)

I should note that Sue didn't downgrade Cisco or Juniper Networks Inc. (NYSE: JNPR) yesterday, considering them better picks than the rest of the telecom bunch. Cisco's resilience is one factor that's led us to consider it for (plug alert) Best Investment Potential in our Leading Lights awards -- and you're welcome to voice your own opinion on that by taking this poll.

— Craig Matsumoto, West Coast Editor, Light Reading

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