When earnings season begins in earnest next week, we're going to hear CEOs and CFOs through the internet and telecom sectors expressing the same basic attitude in a myriad different ways. That attitude is one of severe caution. After all, we have watched a forest fire burn through the financial industry with amazing speed, and nobody is sure it's really out. The USA is so spooked that we have conservatives nationalizing banks and insurance companies and central banks around the world are pouring in unheard of sums of money to douse the fire.
We got another early dose of caution from Zayo's Dan Caruso on his blog today:
...the entire Zayo team needs to fully accept the macro-environment we are in. It is what it is. We can’t control it. It would be a mistake to take it lightly.
And believe me it's not the last expression of that thought we are going to hear from the sector. Venture capital firms have been sounding a much more strident alarm all week, e.g. Sequioa's warning, and of course for startups the need to get their house in order is paramount. For established companies too though, you can just feel them all circling the wagons. We hear all the sirens, we see the smoke in the distance, we see the firetrucks and ambulances racing past, and now we're thinking about what to do just in case they aren't enough. After all, the world may rush to save the banks, but they've let this forest burn to the ground once already. None of us has any illusions that the cavalry will come to save us, whatever comes over that hill we will have to fight alone.
So even if Q3 is good and Q4 looks reasonable too, I still expect to hear lots and lots of caution. Yes, perhaps we will even hear again that phrase we came to dread in the dot com meltdown, 'lack of visibility', which basically means one of two things: a) things look bad but would be worse if we actually admitted it, or b) we have no freaking clue. So expect guidance to be vague, ranges to be wide, and the specificity meter to be set on extra fuzzy. It's not a bad thing though. The sector may be basically healthy, but caution can keep us that way.
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