The new President of the United States began talking about an impending recession well before his inauguration. On Wall Street, a bear market appears to have awakened from a very long hibernation with an appetite for communications stocks (when it isn't decimating dot-coms). Capital spending is tightening and executives at companies like Cisco are describing market conditions as "a little bit more challenging."
Under these darkening economic skies, Marconi announced that it wants to start a new components marketing entity (see story on page 37), new startups in the optical space continue to line up like hopefuls at a Broadway audition, and at least one announcement of some company expanding its production or design facilities crosses my desk every week.
What are these people, nuts?
Personally, I don't think so. Certainly the days of seemingly effortless 30% growth have passed. However, I don't see them being replaced by 30% declines. Instead, I foresee moderate growth that befits an industry whose products remain a necessity, even in a less free-spirited economy.
The evolution toward more data-centric, high-capacity networks isn't suddenly going to stop because Wall Street has turned its attention to a new darling-of-the-month. The demise of Pets.com won't significantly slow the growth of Internet traffic or its use by businesses and end users around the globe.
Instead, I think those in the business of optical networking will have a chance to catch their collective breath and figure out just where this technology is going and how it should be best applied.
This "new rationality" has already appeared in the venture-capital world. Stuart Phillips, general partner at US Venture Partners (Menlo Park, CA), told our compatriots at Integrated Communications Design that now is a great time to invest in optical communications companies. "Now that we're past some of this dot-com fever, expectations in the technology arena are returning to normal," he said. "That means people are putting their heads back down and concentrating on the task at hand."
That requires a more practical-more traditional-approach to developing optical-networking technology and creating new companies. "We announce our technology and go public in six months" is no longer a viable strategy. Instead, coming up with a more "normal" business plan, one that calls for actually developing one's earth-shattering idea into a product and then finding willing customers, is the path that will more likely yield funding results.The bottom line is that the foundation of Wall Street's previous fascination with optical communications companies remains fundamentally sound. The only difference is that the focus will shift from making a promise to keeping it.