The woes of telecom equipment makers will soon be felt throughout the economy. The telecom sector is gripped by an economic slowdown with no end in sight.
Maybe it's a bit too soon to write the obituary for the entire sector, but we won't be surprised when the Grim Reaper calls on a few companies in the industry. And we're certainly not surprised to find telecom companies in their present predicaments: falling or zero earnings, mounting debt loads, and plunging stock prices.
We warned you months ago about Lucent's flirt with junk status. In fact, Lucent made our list of companies on a collision course with bankrupcty back in April. And that was after Lucent transferred billions of dollars in debt to Agere Systems during Agere's IPO in March. Lucent's still drowning in a sea of debt, and its downgrade to junk status will make it even more difficult for the company to raise much-needed cash.
Although Lucent's situation is probably the most dire of all the telecoms, it is clear that the entire industry is facing a devasting slowdown in sales and earnings. And, right now, it is too difficult to separate the ripe apples from the rotten. Steer clear!
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