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After a few quarters of nonchalant statements that the sub-prime mortgage crisis and rising oil prices weren’t going to affect the tech stocks, the bloom is off the rose. The lowered sales forecasts and lackluster quarters are trickling in, and the trend for wireless companies is clear. This morning, networking equipment maker Ciena said in its earnings release that it expected lowered sales for the coming quarter. Gary Smith, Ciena president and CEO said:
“In addition to existing customer-specific challenges, we have recently begun to experience order delays from many of our Tier One service provider customers, which we attribute to their guarded approach to capital expenditures given the uncertain macroeconomic environment. While we’ve seen no project or order cancellations, sales cycles are lengthening and some deployments are slowing.”
Yesterday Qualcomm sent lower the shares of fellow chip maker Texas Instruments, as well as those of handset maker Nokia, after Qualcomm CEO Paul Jacobs said the replacement cycle for cell phones in developed countries was lengthening. If phone sales drop, chipmakers, handset makers from Motorola to Samsung, and carriers will lose. Worries from the carriers will also affect Ciena’s competitors, among them Cisco, Alcatel-Lucent and the troubled Nortel, which has been trading below its cash value intermittently throughout the last month.
Preparations for a downturn began earlier this year at Cisco, but it still reported record-breaking sales for its second quarter earlier this month, and CEO John Chambers said any economic downturn would be short lived. However, it did lower its revenue forecasts slightly for the second half of the year. With consumers tightening their belts, an industry that has grown to rely more heavily on the Average Jane and Joe forking over money for the latest gadget might find themselves doing a little belt-tightening of its own.