That’s a good thing. The market has been pricing the whole sector as if the bottom will drop out any day and everyone will fall into an alligator tank. But so far, the floor has stayed firmly attached to the walls. Its not that there hasn’t been revenue pressure – there obviously has – it’s that it has been relatively pedestrian revenue pressure compared to the horror-fest built into expectations. For a quick cross section:
Cisco Systems (NASDAQ:CSCO, news, filings) saw revenues fall to $8.2B, but that was actually not too bad and neither was Q2 guidance. CEO John Chambers said that both they and their customers are seeing greater stability now, which is obviously welcome news.
Limelight Networks (NASDAQ:LLNW, news, filings) checked in with a sequential decline in revenues from $35.9M to $33.2M, yet beat expectations slightly anyway. Barring disaster, nobody was going to care – the big news was the overturning of the Akamai judgement last month for which they reversed a $66M expense they had accrued. How they managed to do that in Q1 when the judge did his thing in Q2 is beyond my ken, but it doesn’t seem to matter much anyway.
PAETEC (news, filings) managed a rather peaceful quarter, with $399.3M in revenues versus $400.2M in the prior quarter, and adjusted EBITDA of $63.9M which was up from $60.3M. Recession? Yes. Taking on water? No.
Vonage (NYSE:VG, news, filings) actually turned a profit, albeit on a one time “$13 million mark-to-market adjustment relating to the derivative liability in the Company’s convertible debt” which is a fancy way of saying ‘something only accountants care about’. More importantly, the company managed not only to not die yet, but to do it without making a ruckus. Revenue was so flat it was boring, and they lost only 6000 net subscribers.
In other words, in this round of Telecom & Internet Survivor, nobody got kicked off the island and everyone gets to come back next quarter.
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“In other words, in this round of Telecom & Internet Survivor, nobody got kicked off the island and everyone gets to come back next quarter.”
Dude! So for TR Year 2 can we expect more pithy quotes like this?
Nah, I’ll probably revert to 70s sitcoms soon, don’t worry.
Multiples are rising … bandwidth demand is growing fast … Margins are rising … no news, is good news … most companies are healthy …