The U.S. telecom industry looks looks like it is headed for a slowdown with broadband and wireless subscriber penetration levels passing 80% of the population, as I note in my story in BusinessWeek’s current issue.
But at least one telecom exec remains bullish on the industry’s prospects. That would be Juniper’s Scott Kriens, one of the sharpest and nicest tech CEOs I’ve ever met. Riding the telecom rebound, last year Juniper’s stock nearly doubled to $33 from $19, making it one of the market’s top performers. What will save telecom from imploding this time? There is no “field-of-dreams-building” this time around. Here are excerpts from an interview with Kriens last week when I saw him at New York’s Palace Hotel.
Is the slowing economy affecting your business so far?
We have not seen any impact on our business. We may be a poor leading indicator of a slowdown, though. We focus on the high performance part of the networking market. If connections are your only goal, that is not as strategic as a high performance application like enabling five-minute loan approval in a bank, or connecting remote low-cost geographies.
Is your business recession-proof then?
It’s better insulated than the communications networking business. It’s not recession-proof.
Is the slowing growth in broadband and wireless subscribers affecting your business?
A lot of what is driving growth at Juniper is not subscribers but the volume of traffic per subscriber. One video equals 1,000 emails. Every day there are thousands more publishers generating traffic. The consequences of that on network design are powerful. You have to dynamically allocate capacity. That’s very good for us because we build out Internet network infrastructure. Even though the number of subscribers isn’t going up as fast the usage per subscriber is going up
Is there’s something about today’s telecom that makes it more defensible in slowing economic times than in the past?
Service providers are in the strongest position they’ve been in. The use of the network is woven into people’s lifestyles. In a tight economy in the old days, people might have stayed home and not used the phone that much. Now people will stay at home and download a movie or shop at iTunes. The networks are delivering more value.
You sell gear to all of the major telecom service providers. What are their executives telling you? Are they showing more fear or uncertainty?
They are trying their best to cut spending on legacy networks. They are trying to invest more in revenue-generating services such as the triple play.
No one is predicting a telecom bust yet. But how does the industry look like compared to the way it looked before the bust?
It won’t happen. Service providers are investing more in success-based investments where they can see a return. They are spending on hot spots. I would contrast that with the field-of-dreams building that caused the bust. The improvement in spending discipline of service providers protects them from being over-extended.
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