The credit crunch, Cisco and Nortel
I was talking with my friend Gennady Weizman yesterday about medium term (as in the next 6-18 months) impact of the current financial markets crisis on the tech market. Most of our business is in the telecom industry – so I have an interest in whether our clients will have money to spend.
it appears to me that there is a significant difference in the threat surface for telecom business today than 8 years ago when the dot.com bubble burst. Back in 2000, the telecom service providers and their technology suppliers were living off the bubble, overpriced products and services and an over-supply of fiber and network infrastructure. It took the the telecom industry 7 years to recover but today the industry is healthy with multiple growth drivers in VOD, IPTV, broadband, triple-play, VoIP, HDTV, 3G cellular, WiMax and mobile data.
Cisco is my personal indicator – if their orders (many from telecom service providers) drop then it’s a sign that the consumer credit crisis is trickling back up the supply chain to the equipment vendors.
Cisco shares declined in Nasdaq trading after John Chambers forecast the first revenue drop in five years because of the financial crisis. Sales may fall as much as 10 percent in the second quarter, which ends in January
The business took a hit with the credit crunch, driving October 2008 orders for Cisco products down 9 percent. Chambers said that his comfort level with the forecast was the lowest since the dot-com bubble burst in 2000. Cisco plans to save $1 billion in costs over the next three quarters by freezing hiring, business travel and relocation expenses.
Chambers is usually an optimistic fellow – so should we be worried?
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