Signs of spring?

Each year at this time, the thin-blooded among us set up watch for those early signs that winter is finally waning. By March, we in the United States have already consulted Puxatawny Phil the groundhog and reveled in the opening of spring training. While in much of the country it might be another week or two before all the snow disappears, the first robins can't be far away.

Of course, the optical communications industry has been looking for a thaw in its current frigid conditions for the last couple of years. Every time we think we've survived the worst, another blizzard of bad news sweeps through the community. It frequently seems that we're no longer waiting for snow to melt—it appears we're talking glaciers here.

Which leads me to wonder about some relatively encouraging things I've heard and seen recently. More and more, I'm hearing from companies that have strapped on snowshoes and begun to move around more freely than before. An article on page one of this issue describes a few meager signs of life in the long-haul market. Alcatel recently inked a deal with Sprint for metro equipment.

Meanwhile, component companies targeting the data communications space say that business is picking up, as inventories of lasers and related devices finally have dwindled below demand. Companies now announce during their quarterly financial statements that they believe they have some visibility on the market. And—wonder of wonders—Merrill Lynch has upgraded Lucent Technologies to a buy rating. (Which actually may be a sign of the approaching apocalypse, depending on how you feel about one of the telecommunications industry's more prominent scapegoats.)

None of this suggests that prosperity is right around the corner. Components aren't flying off the shelves, the visibility companies espouse generally translates into expectations of a flat year at best in 2003, and Merrill Lynch bases its assessment partly on Lucent's ability to take advantage of a recovery scenario that doesn't begin until 2004.

However, it does suggest that the thump you just heard was the industry finally hitting that elusive "bottom of the market." It's cold and barren, and certain unfortunate companies will join the already unlucky in expiring from hypothermia. But I believe conditions for optical communications companies will not get materially worse than they are now.

Which means that while the optical ice age hasn't ended, the glaciers mentioned here are starting to recede. Companies that take the initiative to generate some heat will be the first to shed their parkas.

Stephen M. Hardy
Editorial Director
and Associate Publisher
stephenh@pennwell.com

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