Cisco Systems will learn firsthand this week if service providers plan to slow purchases of networking gear, a fear that has run through Wall Street in recent months, knocking down the stock prices of Cisco and other vendors.
That slide may have reversed itself last week, at least for a while. Prices of Advanced Telecommunications, Ciena, Cisco, Juniper Networks, Lucent Technologies, Nortel Networks, Sycamore Networks and Tellabs were all up, in Juniper's case as much as $10.63.
Cisco will get a better idea from service providers themselves if that is a temporary respite during the company's Connections 2000 conference this week in San Francisco. Cisco will push its solutions for new and old carriers, wireless and wireline operators, Internet service providers and cable companies over the three-day meeting.
"I'd be more worried about spending on circuit-switching for voice networks," a Cisco spokesman said.
Concerns about carrier capital expenditures traditionally pop up when securities analysts take advantage of the slow summer months to look at the coming year. Several noted that some competitive local exchange carriers were not meeting revenue projections, some had gone bankrupt and that the capital markets, especially junk bonds, were closed to new carriers as a source of funds to continue network construction.
In addition, an AT&T executive has said that the company would reduce capital expenditures next year. Williams Communications is said to be $1 billion underfunded for continued construction of its network. The company recently sold shares in Sycamore and said it plans to sell Corvis Systems' and Optical Networks' shares as well.
All of which is supposed to lead to a drop in the growth of carrier network investment to about 10 percent from 30 percent growth in 2000, according to Credit Suisse First Boston analyst Dan Reingold. Spending is supposed to peak at $115 billion in 2001 and then drops off after that, Reingold said.
Market researchers are less concerned than securities analysts."We don't see [a drop] in optical networking at all," said Dana Cooperson, an analyst at RHK.
Demand for the components used in optical networking shows no signs of slowing, JDS Uniphase told securities analysts last week at a briefing, reported Andy Schopick, an analyst at Nutmeg Securities in Westport, Conn.