It has been a constant theme of ours – carrier consolidation is going to cause some serious pain for telecom equipment makers. By using their dominant position, they can squeeze the proverbial blood from stone. Tellabs learned this hard lesson and reported a drop in revenues.
You see they were counting on selling some Fiber To The Curb (FTTC) gear to BellSouth, which went ahead and got itself acquired by AT&T. AT&T put hold on those plans, and is thinking what it is going to go about those 1.5 million lines. “Two of our top 10 customers have suppressed spending with us,” said Tellabs’ chief executive officer Krish Prabhu during last week’s conference call.
selling to carriers is a bad business. is USA, there are now 2 real ones and several pretenders waiting to get bought and/or focused on subsidized opportunities (CLEC’s, rurals) which will likely go away after the aforementioned 2 decide to make them go away. i did not see an investment thesis for these equipment makers, especially legacy telco, because cisco and the data crowd will get most of the new capex spend, in any event. thoughts?