Network gear makers hopeful revenues to improve

SAN FRANCISCO: Network equipment makers, still staggering after a sharp drop

in technology spending by major clients last year, say orders are beginning to

trickle in and hope their fortunes will brighten later this year.

Juniper Networks Inc. president and chief executive Scott Kriens told a San

Francisco conference on Wednesday the broad technology industry has survived the

worst of the downturn -- made worse by the Internet boom's bust and recession.

"I think we are in the back-end of the fallout phase," Kriens said.

Kriens' view echoed Juniper's fourth-quarter report and its current quarter

outlook. The No. 2 maker of Internet gear behind Cisco Systems Inc., in

mid-month posted a net loss of $5.1 million, or 2 cents a share, compared with

net income of $62.2 million, or 18 cents a share a year ago. Revenues fell

nearly 49 per cent to $151 million.

Juniper said it expects that in its current first quarter it will post

revenues between $150 million and $155 million, and earnings excluding charges

-- or pro forma earnings -- of 3 cents a share, versus 5 cents in its fourth

quarter.

Guidance of essentially flat revenue suggests sales are stabilizing as

customers cut excess inventory, or place new orders to replace aging equipment,

according to analysts. Gear makers' sales plunged throughout 2001 as telecom

carriers and Internet service providers slashed spending.

Signs of improvement



That helped turn shares of gear makers, high-flyers in the late 1990s, into
some of the worst performing stocks of 2001. The American Stock Exchange

Networking Index closed on Wednesday at 317.76, down 77 per cent from its record

high of 1,401.26 on Sept. 1, 2000.

But there have been recent signs that sales could improve. Cisco chief

executive John Chambers this month said that customer budgets, while cautious,

could rise.

A Ciena Corp. vice president of product portfolio management on Monday said

it was too early to call a sector rebound, but noted that inventory excesses are

beginning to be corrected. He also said telecom traffic on major routes was

reaching the point where new investments would be needed.

Speaking at the same conference as Kriens, Extreme Networks Inc. chief

financial officer Harold Covert said he expects an economic recovery to start in

the second half of the year, with companies boosting spending on their networks.

"We think we are starting to see the initial signs of that," Covert

said, adding that Extreme posted combined revenues in its first and second

fiscal quarters of $217 million, compared with revenues of $491 million for all

fiscal 2001 and $262 million for all fiscal 2000.

Many industry analysts, however, remain cautious. They see business

"enterprise" network spending picking up modestly, while network

spending by service providers sags.

Analyst Gabriel Lowy of Credit Lyonnais Securities projects global enterprise

spending on network gear will rise 5.6 per cent this year to $84.7 billion,

while global service provider spending on network gear will fall 19.9 per cent

to $113.5 billion.

(C) Reuters Limited.