The economically stupid

When it comes to understanding and interpreting financial market trends, I feel like George W. Bush at a foreign policy meeting. Like our potential future president, I need to rely on the analysis and opinions of experts to help me slog through economic issues. (Thankfully, I don't have to tackle foreign policy beyond the occasional discussion of a service provider's international expansion plans.)

Given my ignorance, the current state of affairs in the communications industry has me a bit befuddled. I was especially perplexed by some comments made last month at the Next Generation Networks conference in Washington.

There's been a lot of talk lately about telecom downturns, bubble-bursts and crashes. The thing we most often hear from communications companies as they apologize for missing their earnings estimates or announce strategy shifts to account for depressed market conditions is that funding is simply not available to them right now - not from the public markets, not from the debt markets and sometimes not even from the private equity markets.

Maybe it's my stupidity talking, but that simply doesn't jibe with what some of the purse-string holders were saying at this NGN gathering. Check out some of the things I heard and watch for the inconsistencies:

"There's a glut of service providers and declining availability of capital. A lot of the traditional service provider players are experiencing a slowdown in revenues, and the emerging carriers are starting to have limited access to capital," said Geoff Yang, a partner at venture capital firm Redpoint Ventures. "If I were to take a Chicken Little approach, I'd say the next place to look is at the optical guys."

A little later, Yang apparently decided to abandon that chicken thing: "All VCs tend to be optimists. Broadband penetration is just beginning, bandwidth demand is elastic and optical performance doubles every nine months. In the long term, this is the place to be, and we continue to invest very aggressively."

Loosely translated, I think he said that the service provider market was headed into the tank and that there are a ton of untapped opportunities for service providers. He also said the optical market will falter as demand increases exponentially. He added there are limited ways for companies to get capital and that his firm keeps shelling out a ton of dough.

To be fair, there were a couple of warnings inserted in there, comments like "valuations in the public market can be very volatile" and "hold on to your seats." Still, though, am I the only one who's confused by that kind of contradiction?

And it wasn't just Yang. In a keynote speech, WorldCom Vice Chairman John Sidgmore said his company can barely keep up with customer demand, adding nuggets like "we don't see things slowing down" and "the Internet growth phenomenon will continue apace." Later that same week, WorldCom CEO Bernie Ebbers issued uncharacteristic apologies for his company's financial shortcomings.

George Kelly, managing director of Morgan Stanley Dean Witter, had an interesting take: He called Cisco's earnings report - due the following week - a "landmark event" and said it would be the communications industry equivalent of Groundhog Day. Cisco beat analysts' expectations by a penny, so clearly we're going to be fine.

I have a hunch that the reason everyone's choosing to straddle the fence and ride out the current market volatility - or just guess at what's going to happen - is that no one truly has a clue as to what the heck's going on. Maybe financial situations have to be absolutely cut-and-dried for people to be able to analyze and interpret them - not just people like me but smart people, too.

If that's the case, I guess we just have to sit back and wait for things to level out so that someone can intelligently explain to us what has happened.