IP: Comms recovery seen over next quarter or two

[David Farber <dave () farber net>]

> From: Dewayne Hendricks <dewayne () warpspeed com>
> To: "Dewayne-Net Technology List" <dewayne-net () warpspeed com>
> Subject: Comms recovery seen over next quarter or two
> Date: Tue, 31 Jul 2001 05:23:25 -0700
>
> [Note:  This item comes from reader Mike Cheponis.  DLH]
>
> Comms recovery seen over next quarter or two
> By Will Wade, EE Times
> Jul 30, 2001 (12:27 PM)
> URL: http://www.eetimes.com/story/OEG20010730S0044
>
> SAN FRANCISCO - The consensus among several industry analysts and 
> executives speaking last week at the Robertson Stephens Technology 
> Conference is that the communications market will hit bottom by the next 
> quarter, paving the way for recovery in 2002.
>
> "This sector has been under a lot of pressure," said Arun Veerappan, 
> managing director and senior technology analyst for investment banking 
> house Robertson Stephens, at the San Francisco conference. But the end is 
> in sight. He predicted that the communications, silicon and systems 
> markets will bottom out either this quarter or next quarter and that next 
> year will be one of growth. "The first quarter of 2002 should be the 
> quarter when we see some kind of snapback," he said, with single-digit 
> sequential growth rates for the first half of next year. "And we think 
> 2003 is going to be big."
>
> This downturn is different from those of the past, Veerappan said, because 
> previous cycles have been driven by capacity issues. When chip makers add 
> too much production capability, they are faced with a glut of devices, a 
> situation which leads to price cuts and falling revenues. This time, the 
> situation is reversed, with the downturn driven initially by a sudden 
> drop-off in demand from end users. Chief among these are failed Internet 
> sites that are no longer purchasing advanced networking gear.
>
> The Internet boom of the last few years led many chip and system vendors 
> to increase their own production rates, so not only have their end users 
> disappeared, they also find themselves now with more products than they 
> can sell and the ability to make more than they need. "This is uncharted 
> territory for the communications market," said Veerappan. "This is the 
> first demand-driven downturn."
>
> Robert Bailey, president, chairman and chief executive of communications 
> silicon vendor PMC-Sierra Inc., agreed that the downturn will hit bottom 
> before the end of the year, and said that the slump has hit the chip 
> makers evenly, despite differences in product line or technology. "We are 
> all pretty tightly linked together right now," he said. "Because if the 
> systems aren't shipping, nobody sells any parts to go into the system."
>
> One of the common arguments explaining the communications downturn is that 
> there is a glut of bandwidth, making more networking gear redundant. Gary 
> Smith, chief executive of Ciena Corp., debunked that notion, noting that 
> more and more information is shifting onto the global data networks and 
> away from the legacy voice networks. "This is a fundamental shift going 
> on," he said. "There is cause for optimism in the medium to long term."
>
> In the short term, this year will certainly see a decline in the overall 
> optical networking gear market, he said, with total worldwide revenues 
> likely in the $23.4 billion range, down from almost $29 billion last year. 
> Smith said this year's drop puts the market onto a more realistic path, 
> noting that at the height of last year's euphoria, some analysts were 
> forecasting that the optical networking market could reach $80 billion by 
> 2004. "That is a big chunk of the entire world's GDP, and rational people 
> have to question that," he said.
>
> Part of the reason for that long-term optimism is the widely held view 
> that there will eventually be just one, massive network, probably based on 
> the Internet protocol (IP) format, used for voice, data and entertainment 
> traffic. Even if it takes decades for this transition - and most analysts 
> think it will - the high-end networking vendors see this as the long-term 
> driver that they are all working toward. "The network of the future will 
> be a new, IP-based network," said Marcel Gani, chief financial officer of 
> Juniper Networks Inc. He pointed out that the current system, with the 
> existing voice network running parallel to the rapidly growing Internet 
> backplane, is both redundant and expensive. "The goal is to move all the 
> traffic to the Internet infrastructure."
>
> Paul Johnson, networking and telecommunications analyst for Robertson 
> Stephens, said that the growth of bandwidth demands are inevitable, even 
> without a so-called "killer application" to drive up the need for 
> bandwidth. "The killer app is just more of the same," he said - more users 
> on the Internet, using it for more things. As an example, he said that the 
> size of files downloaded from the global network has steadily increased, 
> from Web pages and e-mails, to e-mails with attached files, to digital 
> pictures and audio. The move to video will further drive up demand, for 
> both videoconferencing and home entertainment needs.
>
> David Rickey, president and chief executive of Applied Micro Circuits 
> Corp., is even more optimistic than his peers. "We think we've hit the 
> bottom," he said. Judging from the pace at which his backlog grew last 
> year, and then shrank this year due to cancellations, he thinks the worst 
> is over. "Our backlog is now close to zero, and we are seeing a lot less 
> tendency toward cancellations, because there is nothing left to cancel. 
> There is nowhere to go but up, but it sure is a bummer about the $1 
> billion in lost orders."



For archives see: http://www.interesting-people.org/