The Insanity Rages On

I have to say, the last month has been truly surreal.  The financial disaster and the hurricane surrounding it has sent the stock of most fiber and data oriented companies into a huge tailspin.  The situation is fundamentally different than it was 7-8 years ago when the tech bubble burst, and yet when the street panics it doesn’t care.

Back then, at every turn we were presented with the ‘glut’, the fact that much too much capacity had been put in place.  We squirmed and rationalized, but it was true and the whole situation was to a large extent our own fault.  Tech stocks were punished much more than the rest of the market and rightly so.  Too much money had been poured into the sector chasing too few dollars, and there was hell to pay.  And hell did get paid, as literally hundreds of companies from fiber builders to content providers went bankrupt and shareholders lost everything.  Nobody bailed us out, I guess we weren’t important enough.

Now the financial sector is coming face to face with its own hubris, and of course is getting bailed out – albeit painfully.  Meanwhile telecom and data companies this time are pretty solid, there is relative balance between supply and demand and overall the sector is really quite healthy relative to the rest of the economy.  Sure demand seems soft in some sectors and the tide may be going out, but any slowing of growth we’ve seen so far seems trivial next to the movement of the bulk of the economy.

But does that mean we get to watch from the sidelines this time?  Of course not, telecom and data stocks have gotten punished beyond that of the general market, many being pushed toward where they lay at the bottom of the last bubble.  Even the stronger nextgen companies are feeling the pain.  TW Telecom fell to $8.28 at one point yesterday, it’s lowest price in almost 3 years despite rock solid performance during that time, profitability in hand, and no need to access the markets at all.  Akamai traded at 13.23 at one point yesterday before rallying, also a price not seen in 3 years.   These were amongst the best run public companies in their niches over that time period, all for nothing according to the market.

Ah well, I suppose all the sector can do is prove its worth on the ground and wait for the panic to settle.  Operate the business, sell services, grow traffic, and let wall street figure it out someday.  You know, after they figure out their own business maybe they’ll figure out this one.  Hah.

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Categories: Financials