Whatever happened to the component shortage?
Remember when companies were giving subtle warnings a year ago that they were cautious about upcoming quarters because component availability was spotty? Now we see another new optical component company every other week. Somehow the shortage turned into a glut in a year.
At this time last year, optical component companies consistently exceeded revenue growth and earnings expectations. Demand outstripped supply, and shelves were stripped bare of inventory.
Systems vendors were actually hurting because they couldn't ship finished goods. There was nothing to put in them.
But in the fourth quarter of 2000, things began to turn around. People stopped buying. And when people stop buying it usually means demand has softened - or that funds have dried up.
High-flying companies, and their stock, tanked. Thousands of people were laid off. The economy went into a nose-drive. Inventory is now piling up on the shelves of companies like JDS Uniphase, Corning, Bookham and New Focus.
So, why are so many optical component companies crawling out of the woodwork? Because they're banking on the notion that demand remains strong. That's got to be the only reason. Otherwise, these start-ups couldn't get funding.
They're hoping - no, they're betting their businesses - that once purse strings loosen up a little bit, systems will be flying off the shelves once again.
Just in time for the next component shortage.