Wisdom vs. Information's  Instablog

On September 9, Scott McElroy, VP of Technological Realization at AT&T (T), announced HSPA would be available in six markets by the end of the year. HSPA is a software and infrastructure upgrade that doubles capacity for wireless devices from 3.6 Mb/s to 7.2 mb/s. T has been adding cell sights instead of upgrading software and fiber. HSPA software upgrades require copper lines to be upgraded to fiber because the copper backhaul simply cannot carry the amount of traffic that the HSPA software can process.

An upgrade path that included HSPA+ with 21 Mb/s capacity was previously announced, but was conspicuously absent from this speech. On September 15, Kris Rinne, VP of Architecture and Planning explained why: T has decided to "focus on LTE rather [than] HSPA+." (Complete article here: http://telephonyonline.com/3g4g/news/Rinne-4gworld-keynote-091509/). In other words, T is going straight to LTE for a 2011 rollout that matches the Verizon's (VZ) LTE upgrade path. This is big news for investors because the inevitable LTE buildout is going to be sooner and faster, thus more expensive than previously thought.

Rinne demonstrated in her presentation that data traffic on the 3G network had increased by almost 5000% in three years. (I know, these numbers keep getting bigger, I just report it, I do not create it.) She noted that mobile broadband, email and M2M connections had increased traffic substantially-- on top of the iPhone.

LTE delivers a megabit of data for three percent of the cost of basic EDGE 3G, while HSPA+ delivers a megabit for fourteen percent. The conclusion is that T believes that there will be enough traffic to justify the extra expense of the LTE capacity upgrade.

I own T long-term. The issues I see: enterprise networking equipment is rapidly becoming less expensive yet more powerful, and that will reduce T's revenues. I am not concerned about wireline, that copper is going to get used for something; I have no insight, just confident that connected wire is not whale oil. Data traffic seems like a winner, reduce cost per Mb/s and increase data wildly; however, the experience of Japan and Europe, which adopted faster devices earlier, is that those telecoms have not in fact made more money. That could have more to do with government regulation, but that analysis is beyond me; thus, I consider T a hold.

Most important new factor is that T and VZ are hurrying, which means they will be competing for services and equipment, thus less able to pressure networking prices as much as they could if they were moving methodically. T's new domain purchasing systems means that T is not dealing directly with most of its suppliers, so profit margins from companies further downstream will be slightly effected. CDMA and other 3G products will continue to sell in Tier 2/3 carriers and third world countries, but CDMA equipment was already under pressure and some companies (NT in particular) were losing money on CDMA products.

This article updates earlier articles that you can review for evaluations of telecom networking sectors. Only 20% of Tier 1 backhaul is fiber, so a huge buildout will occur over the next several years. ALU and ERIC are T's biggest network suppliers. With intense international price pressure from Huawei and ZTE (ZTCOF), I am avoiding those companies, but ERIC is the healthier of the two.

CSCO, CIEN, JNPR, TLAB, ADCT, CTV and MOT are good bets for significant involvement. NSN, NT, NEC, Fujitsu and Hitachi have been significantly involved in the past. BRCD, ELX, and QLGC are good bets for SAN/LAN equipment (MLNX is growing but small, visibility is limited). Some chip companies will also do well but they are outside my interest (ALTR, XLNX, MRVC etc). NT's 40Gb optical equipment has been dominant in the past, but since NT is BK visibility is limited-- will CIEN buy NT's MEN division, or someone else, or will T go another direction? PWAV, ADTN, SCMR, ZHNE and HSTX are small cap value companies that are T customers as well; I hear Cramer is excited about a couple of these stocks, check his site if interested. I sold HSTX after his rec bumped it.

Everyone says they are ready and have bench tests to prove it, but in fact field tests are never the same. Motorola (MOT) and Starent (STAR) are already building out LTE in Asia. STAR has a high PE, high GM, high growth, and are stealing market share from other packet software companies. MOT is also a microwave backhaul leader. Testing becomes more important as network speeds increase. Agilent (A), JDSUniphase (JDSU) are the biggest testing companies and XXIA and EXFO are strong as well; there is little upside on A at 60 PEx, my JDSU price target is $11.

Optical companies have consolidated significantly in the last year, but pricing pressure is still intense; chip, equipment and system builders have generally been losing significant money and more consolidation is expected before the sector becomes healthy. However, most of these companies are priced around 1X revenue so value in the sector is possible. FNSR is the number one component and subsystem supplier, their active optical cables are being adopted already, and they are reverse-splitting shares one for eight September 25th; when 40Gb modulators begin selling again FNSR will be profitable, my short-term price target is $2 pre/ $16 post reverse split. JDSU is number two, and Opnext (OPXT) number three. Oclaro (OCLR) has never made money but the technology is above average, my short-term price target is over $2. INFN has heavy long-haul competition, has little upside at $8 and is being squeezed into an ever-smaller niche long-term, but has the potential to surprise by during the next four quarters.

In order to handle the expected increase in IP traffic, T, VZ, S, CLWR and DT need to lay billions of fiber and optical equipment while upgrading networking equipment as well. Faster networks are less commoditized. The companies with stronger software and higher profit margins are the better bets to take a larger share of the LTE buildout.

Generated with Seeking Alpha transcripts and the above referenced TelephonyOnline article

Disclosure long OCLR OPXT FNSR JDSU STAR MOT CIEN ADCT CTV PWAV CRNT ELX ZHNE

The Obama plan will add thoudands of dollars of expenses to even the smallest businesses while decreasing the annual expenses of corporations. Thus, it will increase the advantage corporations have over small business already.

Obama says small business has some kind of moral obligation to provide health care to employees; where did he come up with that?! My obligation is to pay my employees what I agreed to pay them for certain labor. What they do with that money, and how much they need, are not my concern nor Mr Obamas. If federally mandated health care is so vital for the economy, then why have Japan and Europe LOST relative standard of living to the US over the last 19 years? Europe is now 30% behind! Do you want to trade 30% of your wealth for guaranteed life long health care? Really?

I defy anyone to recall a more anti-small business proposal in the history of US politics. This is, as far as I can remember, the most anti-small business proposal in the history of this country; this proposal extends a constant stream of anti-small business proposals and administrative actions from the most anti-small business administration that this country has ever seen.

This article is a follow up to an earlier article. I repeat: several of these stocks are quite risky and should be, at most, a small part of a balanced portfolio. Visibility is low on the micro cap stocks, but experienced investors know that the majority of the growth in the stock market comes from outside the S&P 500 and Dow industrials. Data movement is increasing rapidly because CDNs and cloud networking specialists need to move larger amounts of data faster in order to be competitive with traditional networks; Cisco estimates total data transfer will increase 5X over the next five years; hard to imagine, but believable since AT&T increased wireless traffic 300% the last six months.

The National Broadband Initiative stimulus effected most of these stocks. The first tranche is 4.2B from the government and another 0.8B matching funds for a total of $5B. That is split among everything from rural computing centers to sophisticated packet software. Far over $20B of RFPs are competing for this $5B, so there is really no way to guess who will win in September; however, the government will try to be 'fair' and different sectors will get represented proportionately. Fiber is roundly expected to be half the spending (2.5B), including everything from actual fiber cables to software that runs the modulators that manipulate the laser signals (not to mention "administrative costs" oh, excuse me, I just threw up).

My response is to divide the fiber installation specialists who will be involved by market share, then give each a conservative cut; and, to assign ten percent to the optical and backhaul companies and divide them by market share. I will discuss some companies that were not part of the original article.

Procera Networks (PKT) (0.68 to 0.59) got a nasty write up in TheStreet.com. They pointed out that PKT had a dilutive stock sale and is burning as much cash per quarter as they have in the bank. That was true, but PKT's sales are on pace to rise at least 20% for the year and become cash-flow neutral by the end of the year. PKT sells session border controllers (SBC), an annual market expected to grow 77% over the next four years, and intelligent packet inspection; PKT is in several partnership discussions and has a Tier 1 customer. SBCs are an important part of network capacity growth, so it is possible PKT will be acquired, and doubtful they will go BK. At 0.59, I would still be a buyer.

Fibertower FTWR (0.47 to 0.66) and Zhone ZHNE (0.42 to 0.58) already got exactly the bump I estimated for the stimulus. FTWR builds out fiber-connected and hybrid towers and are a good bet to thrive over the next four years while 4G is built out; and, ZHNE specializes in transitioning from copper to fiber. Both have plenty of cash, low enough debt, but have never made money. Sycamore SCMR (3.11) has so much cash they could liquidate tomorrow and you would make money-- and so diluted they may never reach a normal PEx. They seem to have missed the consolidation wave from 1H, and they must raise rev over a multiple of four to get a 16PEx at this price. This stock has little downside, but little visible upside either; they could absorb several million in stimulus and not move a penny; then again, we have all seen super cash-rich tech companies focus on R&D and get ahead of the curve, so who knows long-term.

Occam Networks OCNW (3.90) already got its stimulus bounce, as it should since it is a rural specialist; at 0.8 P/Sx and 1.5 P/Bx, it is still a good price. Powerwave PWAV (1.24) is operational cash flow positive, priced for bankruptcy at 0.2 P/Sx, and still waiting for a stimulus bounce; quarterly sales were down 45% YoY but cash flow does not lie, this company has strong international sales and is not going BK soon (as I warned before, Chinese customers over-ordered in 2Q, thus 3Q could be ugly, then 4Q good).

Finisar FNSR (0.63 to 0.94), JDSUniphase JDSU (5.80 to 7.02) and Opnext OPXT (2.25 to 2.71) are the #1-3 OCN subsystem and component suppliers. They all got their stimulus bumps already, so there is no upside there. FNSR's active optical cables are already being used in HPC networking even though standards have not even been developed. I have a hard time imagining any of these three will not double in the next two quarters because more fiber is absolutely necessary; JDSU has double exposure to stimulus because they are the optical testing leader-- every system installed will be tested. EXFO and XXIA are the other testing specialists, both should get a little bump. Long term, I do not like the fact that FNSR is heavily diluted at over 400M shares (which is why it receives so much hate), so I may sell after its steep rise once revs increase.

I simply forgot to include Oclaro in the earlier article OCLR (0.72 to 0.89). No debt and lots of cash, OCLR is a combination of the best parts of two different optical companies, operation cash flow positive, and selling for 0.38x rev, ridiculous; many people lost money on OCLR's predecessors so it is widely hated as well. Oplink OPLK (13.81) did not make my P/Sx bargain list at 1.91. Its CR is 11.1 and has no debt; P/Sx in comm equip averages 4.4; they made money last quarter; and, they may be the best investment with only 20.5M shares outstanding and all the right customers. No stimulus bump yet, then should go up steadily as revs increase.

Harris Stratex Networks HSTX (6.32) is 'The worldwide WiMax specialist', just like five other companies, but their title did not keep them from losing Clearwire (and a lot of China) to Huawei (the new champ...?). HSTX is strong in Africa and India and has several Tier 1 customers. WiMax is great for rural areas and the 2nd and 3rd World because it is relatively inexpensive, fast, simple and reliable and adaptable to current packet technology. HSTX has plenty of cash flow so I am surprised they did not get a stimulus bump; if you can get them around six and hold out until the stimulus funding is announced in September, you should be rewarded. Exact same advice with Adtran ADTN (22.63), an excellent company that is no bargain; ADTN already has experience with rural telecom, and no downside if I am wrong, solid.

ADC Telecom ADCT (8.04) was not part of my high-risk bargain portfolio, but it is priced at 0.7 P/Sx. Its price has been fluctuating wildly but appears to have a stimulus bump priced in. SInce ADCT is already cash flow positive, it should be profitable again before most of its competitors, thus I recommend this stock regardless.

The big guns are Tellabs TLAB (6.31), Motorola MOT (7.72) and Commscope CTV (26.04), 0.8x P/S. I am not impressed with TLAB long-term, but it gets the HSTX advice. MOT's price may not move even if they do score on stimulus, too many cell phone issues; of course, if they get good news on the stimulus and a good reaction on their new Android phones at the same time.... CTV is exciting here: most of the companies listed here have segments that will not be effected by the stimulus-- every CTV segment is effected by the stimulus; furthermore, their sales are in the toilet because of the 1H Tier 1 telecom spending freeze, and as the cap ex spending ramps up again CTV's rev should go up substantially (T is expected to raise spending 30% 2H).

Ceragon CRNT (7.21) has a 1.2 P/Sx, a 1.4 P/Bx, and positive operational cash flow. DRGN, CRNT and ALVR are backhaul specialists that should get some stimulus dollars, esp CRNT. DRGN is no bargain and ALVR has a 1.0 P/Sx. AIRN (0.08) is on the verge of insolvency despite having some cash, but if they get a few million from stimulus they could have the most immediate upside-- VERY RISKY. Beware pump-n-dump on this stock.

Nextwave WAVE (0.33 to 0.83) merits a mention since they are up 151% since my article. No news, huge volume and very little accumulation make me guess a little institutional activity and and a lot of day-trader pump-n-dump. I have been making money trading this stock, but at $0.83 it is no longer a bargain; if Android phones sell great, I will get back in.

Since this article focuses so heavily on optical, INFN merits a mention. The stimulus is for last mile fiber, and INFN specializes in long-haul. First Huawei began taking large chunks of their value-priced long-haul, now Ciena (CIEN) appears to be competing on high-tech long-haul. INFN says they will be cash-flow neutral by the end of the year and make money next year and I believe it, but it has little upside at this price and is in a bad position long-term since it is getting forced into a very small niche. The CEO quitting is strongest factor.

This is not an exhaustive list, simply a mix of companies of which I keep track likely to effected by NBBI stimulus. The stocks under $2 are subject to manipulation, and the stocks under a $1 are often manipulated so be careful when investing. Networking, telecom and the cloud (the internet?) are becoming the same thing, so prepare for disruption as flexible companies lose revs but become more profitable and old work horses get plowed into the field.

Generated using InfonGen, Seeking Alpha transcripts

Long PKT FTWR ZHNE OPXT AIRN FNSR PWAV CTV OCNW JDSU OPLK ADCT OCLR
 

JDSU is trading for $5.76, down from $5.79, after announcing that 4Q came in near guidance and guiding up for 1Q10. 4Q sales were down 29% from 4Q08, and annual sales were down 15% from 2008. JDSU's EPS and margins are basically meaningless because of restructuring, several unusual and one time expenses/incomes; take out the junk and they lost ~$0.29 a share 2009 (my numbers), far below what analysts were expecting for the year. 1Q10 revenue guidance is 283-300M with a 0% to +3% net margin.

JDSU sells optical switching and transport to ALU, ERIC, CSCO, Huawei, etc., lasers, advanced optical technology and testing equipment. ROADM sales were down this quarter, orders are up next quarter. Book to bill and orders are up 1Q10. Bookings are 6-8M for storage. Asia has been down double digits sequentially the last two quarters because of the communications division; management said the market is down generally but I assume the worst after two straight reports, losing share.

JDSU bought Finisar's (FNSR) high margin testing division; industry estimates generally estimate 6-12% growth for testing over the next five years. Sales have been solid and margins high. JDSU just introduced the first 100GbE testing suite. According to IDC, 100GbE service and applications sharing are more complex thus increase the need for testing, so this is a growth market-- JDSU is now tough to beat in optical testing, and testing is now JDSU's largest division by revenue.

JDSU has reduced their expenses to $275-280M break even per quarter; that is an impressive $75M reduction in expenses over the last year. Free cash flow was $9.7M for 4Q and $151M for 2009, and with $695M in cash JDSU management will continue to pursue consolidation.

JDSU quoted several statistics on video demand, check my old posts for details-- the point is that video and VoIP (voice over internet) are disrupting communications systems and carriers will be upgrading. Management modestly stated that JDSU will benefit from the NBBI (national broadband initiative) starting to roll out in August; cannot estimate how much, but probably material. Most importantly, JDSU's advanced optics division (AOT) sales were down 1% sequentially, down 4% YoY, solid results given the optical sector bubble and macro conditions.

JDSU's break even is now ~$275M and all three divisions are poised for significant growth. Ignoring a one time boost from the NBBI, JDSU could easily double revenues over the next five years; if JDSU Q revenues return to $400M (equal to 2008), shares would sell for ~$11.80 at 16PEx; earnings and share price should start increasing next Q.

Asia is bad news and and the communications equipment sector is very competitive (ahem, understatement), and the professional analysts will probably focus on that news so I doubt JDSU's price will move; however, the numbers show that JDSU has weathered the storm, bottomed, and come back to the surface a stronger company. NBBI should inflate next quarter's earnings by several million dollars. JDSU looks like one of the best bets to survive the optical bubble and double its share price over the next two years as earnings surprise.

Will buy JDSU on the way down

 

 All of these companies have serious problems, generally more risky than junk bonds. All have been hammered by the ten to thirty percent drop in world wide telecom capital spending and terrible enterprise network spending. I do not recommend buying any of these stocks; you must decide for yourself if they fit in your portfolio. Products from these companies allow carriers to process wireless voice, video, data and other sources together. Data and video are driving rapid growth and encouraging carriers to keep up with data growth by delivering more bits per dollar from one system for all traffic.

Most of these companies sell products that move more bits per dollar by eliminating redundant equipment or software that maximizes that equipment; the rest are backhaul specialists who move data from the radio access network. Software has become better and equipment has become much cheaper, and data has become cheaper per bit and video adequate. As a result, data demand is growing quite rapidly; AT&T's data revenues doubled over the last two quarters. Analysts generally estimate that the worldwide demand for data will double over the next five years; WiMax expenditures are expected to double by 2014 to $4B annually, according to Maravedis, Inc; and, IDC estimates US PC data connectivity subscribers will grow 39.2 CAGR until 2011.

Procera Networks (PKT) $0.68 specializes in deep packet inspection and bandwidth management. Their sales are rising, debt is negligible and revenues are expected to grow 30 percent a year over the next five years; its earnings and OCF are still negative, however. Growing rev during a time of lower spending indicates that PKT may have a moat and huge potential.

Fiber Tower (FTWR) $0.47 provides middle access broadband, connecting fiber and hybrid networks to radio access networks. FTWR revenue grew 80% last year and 31% YoY last quarter. They have a little debt and plenty of cash, which they will need because they just had a gross profit quarter for the first time; FTWR has never made a profit. FTWR will get a one-time boost from the NBBI directly and indirectly. IMO FTWR will achieve modest but solid earnings for the next four years.

Level Three (LVLT) $1.21 and Nextwave (WAVE) $0.327 both have an exciting asset and a mountain of debt. LVLT is OCF positive due to heavy depreciation and future debt. Their fiber network is accessible to about 100K enterprises, and their CDN network, while simple, is now considered to be in the top five; LVLT has a promising future if they can somehow survive the current enterprise freeze and start making some money before the debt appears 2011. WAVE owns Packetvideo, a company that makes software that maximizes coordination with the Android mobile operating system, and quite a bit of broadband spectrum. WAVE is selling the spectrum, and contrary to some rumors, they will be lucky to get what they paid for it; those spectrum sales should cancel most of WAVE's debt. Packetvideo is their only real asset, and it is now owned 35% by another company. Packetvideo had disappointing results this quarter, but few Android phones are currently on the shelves; how much money will WAVE make when China sells a few hundred million Android phones (yes, I am exaggerating)? One can only guess, but I am not ready to sell WAVE yet. LVLT and WAVE are likely to substantially dilute or go BK.

Here are some promising low price-to-book, low debt plays: ZHNE $0.42, OPXT $2.25, UTSI $1.79 and AIRN $0.08. Price to tangible book is 1.2x, 0.7x, 0.5x and 0.2x. Zhone makes equipment that allows carriers to migrate from copper to fiber without disruption; ZHNE has more debt than the other three, and annual revs are down while gross margins are up. OPXT makes optical equipment and is probably the least likely company of this bunch to fail; they have plenty of orders but no deliveries. UTSI has lost literally tons of money, but has divested into their core competency, mobile software, and, with 90% of revenue in China, could return large profits after 2010. AIRN is bleeding a lot of cash, and needs WiMax spending to increase soon-- another very risky play.

Texas Prototypes (TXPO) $0.008 is currently in default. They are another optical company waiting for orders to turn into deliveries on the way to $4.6B PON (passive optical networks) spending by 2013. If they get bailed out and sales increase, I will be a buyer.

Finisar (FNSR) $0.63 and Powerwave (PWAV) $ 1.27 are similar financially only. Both are almost breaking even and increasing annual revenues, but have a large amount of debt and poor BV ratio; IMO they are both ahead of the curve because of relatively good revenues. FNSR makes optical cables and equipment and seems likely to succeed with an average projected CAGR 10.2%. PWAV is a backhaul specialist thick in APAC. Chinese carriers over-ordered in Q2 and have too much inventory; guidance for Q4 is up; thus, Q3 may be horrible then Q4 excellent, so prepare for a bumpy ride.

A couple of these companies will probably liquidate and a couple of them will probably become huge; my strategy is to invest a small amount of time and money into each and let God and the market sort them out. I am excited about UTSI and PKT, and IMO OPXT is a borderline 'safe' investment, but visiblility on these types of investments is so low that I aim for average returns instead of the perfect pick. Most importantly, never get emotional about little companies regardless of the upside; they are always risky, and in this case the risk is amplified by disruptiveness of the technology and negative macro environment. Several of these companies are trading near 52 week highs, so the best stratgey could be to wait for a dip before improved earnings in Q3 or Q4.

Cisco's (CSCO) executives want to talk about clouds-- cloud computing, that is. During today's conference call, they repeatedly brought up the Web 2.0 and the effect of cloud computing on their markets and said that they are receiving their first orders for "unified computing."

Cisco's revs and profit were close to guidance, and forward guidance was a bit bearish, expecting revs to be down 15-17% Q110. Nothing interesting in the numbers except lowered expenses $1.5B annualized; if they can maintain those numbers, that adds another ~$4.20/share at 16PEx. Since TTM EPS is 1.06 and TTM OCF is 1.69, you get a value of $17 either way, and add the 4.20 you get 21.20, very close to what CSCO is trading for after hours.

Very roughly, cloud computing means maximizing resources through a combination of placing stored bits closer to users and sharing computing power (very roughly because even experts disagree on the definition). If you know your employees in Dallas are going to retrieve certain data regularly, you are going to store that data near them; same thing for customers retrieving data through service providers. Resources are maximized by using storage or computing power on several servers/ supercomputers at the same time, maybe even ones that you do not own. Fiber optics and microwave transmission facilitate these trends, and computing/software as a service ("c/saas") is an example of cloud computing that adds total computing supply. I completely agree with the the experts who say that this was already happening, and "the Cloud" is simply a way to market it.

Cisco directly said what everyone else is saying, video is driving the current trend. The Cloud was already happening, but demand for video has increased demand for IP traffic enough that adoption of new software and equipment is now financially necessary: serve your customer's appetite for video or someone else will.

So, time to buy Cisco, right? Not so fast. Google (GOOG) and Microsoft (MSFT) have already stated that they see spending for data centers going down. How is that possible when IP traffic is supposed to double over the next few years? That sexy Cloud, as well as some new epuipment. The cloud systems allow companies to store and move more bits per dollar; the companies move more data, and buy new equipment, but not necessarily for more total dollars than before. The new equipment moves and stores many times more data, but costs only two and a half times as much (in the case of 10GbE), going down evey day; furthermore, more companies are chasing this possibly shrinking pie, driving down prices and margins.

Enterprises and service providers will definitely be buying some very expensive, state-of-the-art equipment to keep up with video and so-called "large files." The question is, will they need to increase their capital spending? The enterprises that just laid off employees during the recession will not fully utilize the systems they have for years; new enterprise telecom systems are higher powered and cheaper; and, the cloud systems complete more computing with less equipment. Service providers are not in the same situation because they must update their software and equipment to handle the video, especially dramatic in the backhaul areas of the telecoms; once again however, they will be moving much more data for much less money-- Verizon (VZ), for instance, does not intend to increase cap ex as they build out their video-ready 4G system.

I could write two pages on all the contracts Cisco has won and lost lately and you would not know anything important because no one knows how much those contracts are worth, not even Cisco; the Cloud is in its infancy, and much of the 40Gb and 100Gb equipment, from software to interfaces, is still being developed. Some companies with better software, such as Starent (STAR), will win more than their share of this business. Cisco may win more than their share as well. My point is that despite the wild expansion of data, most likely the grand total market that Cisco rules is staying the same size while more competitors, some state-supported, are competing.

One wild card is Cisco's cash. They have stated before that they do not intend to end the year with $33B in cash, and they now have $35B. I am not going on a limb by predicting that they will buy at least one more company. Analysts have reported that Cisco is losing VZ business to Alcatel (ALU) because of Cisco's weak optical offerings; thus, I doubt many would be surprised if Cisco tries to buy an optical specialist like Tellabs (TLAB), or JDSU. I am just speculating, because I have no idea what Cisco thinks is the most profitable direction. Another wild card is overseas where Cisco already has significant sales, but if China's big two, ZTE and Huawei, fail massively (highly unlikely) or India rockets instead of putters out of the gate then Cisco will benefit.

Service providers, especially the telecoms, have put off cap ex during the recession; that can only be postponed, not cancelled, because the traffic must be served. So, there will definitely be some bounce back/ snap back spending as the economy stabilizes and web surfers get irate; however, as long as Cisco's long term growth visibility is this hazy, I would not sell but I definitely will not buy.

Long STAR, CIEN & T, thinking about speculating in TLAB and JDSU