Monday, January 31, 2005

SBC buys AT&T; Ciena could suffer

Its official! SBC is buying T for $16B. SBC is buying T for its large business customer base, but wireline business has become a tough business with most companies having very difficult time in generating growth from this business. This acquisition should help stop the tide of declining wireline revenue but do not expect major turnaroud in wireline, consider this a stop-gap for few years. T purchase by SBC will have no affect on the wireless landscape. Expect VZ and BLS to start thinking about buying FON, MCI or Q. Like T, FON also has large business customer list and so does MCI. Buying FON makes the most sense for VZ. For one VZ can regain the #1 wireless subscriber throne that SBC/BLS took away from it by buying AT&T Wireless through Cingular. VZ has indicated that it wishes to make wireless larger portion of its revenues. Plus FON brings a well established IP based long-distance network as well. With NXTL already in process of buying FON, competitve bids could give a nice pop to stock.

On equipment provider side, the biggest negative affect from T acquisition by SBC is for CIEN which supplies T with Metro DWDM products but not to SBC which buys its Metro DWDM products from NT. T also buys long haul DWDM products from LU and that is also supplied to SBC by NT. CIEN also supplies T with Optical Switching capability but SBC uses ALA for that.

Consolidation as a whole could be positive for equipment providers over time as the profitability of carriers improves but in the short term consolidation is a distraction that equipment providers do not need their customers to have.


Anonymous Anonymous said...

You have made many good calls. One bad is ok

3:05 PM  
Blogger Slash said...

What do you mean one bad is OK? I make wrong calls, but this one is not. CIEN is going to have deeper issues, its running up because people were short thinking they will miss also they might get some BLS business. As you will see this one will come true also, I have not seen a more mismanaged company.

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