At an analyst event today, Ciena indicated that the current caution in spending among service providers is spreading to Tier 2 carriers and enterprises.
Last month Ciena lowered its expectations for the fiscal year based on a spending slowdown among Tier 1 carriers, particularly (but not exclusively) in North America. Projects are not getting cancelled, just “pushed out,” the vendor said then.
Ciena executives made similar comments today — deals are still in place (and in fact, the sales funnel looks good), but the pace of deployments is slowing.
“Is it worse overall than when we talked about it in September? Probably not,” Ciena CEO Gary Smith said. “It feels a little worse because of all the stuff that’s happened in last few weeks. You’re seeing uncertainty trickle through to enterprise customers and Tier 2 carriers. But I don’t think it’s appreciably worse [than a month ago].”
Nervousness in the Tier 2 space is understandable. Carriers there have been waiting for credit markets to improve in order to move on some much-needed M&A. But the current market volatility and uncertainty make such deals a lot harder to come by. Last week the Wall Street Journal reported that Embarq, a $6-billion company, had hired JP Morgan Chase to help it sell itself but that market turmoil restricted bidders’ access to capital. Tier 2 carriers need to scale, but how much longer can they wait for the economy to improve? I want to hear what YOU think.