It was an ugly day for the telecom bellwethers, which have fallen from some lofty heights over the past year.
"It looks like telecom companies just don't want to spend right now," A.G. Edwards analyst David Heger said. "In general, everyone expected a telecom slowdown this year...it seems like its turned out to be something more dramatic than a slowdown."
Cisco Systems, a network equipment maker, closed down $2.19 at $26.06, a new 52-week low compared with the stock's high of $82 a share over the same period. Shares of telecom equipment maker Nortel traded as low as $18.71 Tuesday, compared with the stock's high of $86 during the past year.
JDS Uniphase has stumbled the most over the past 52 weeks. The maker of components for optical equipment fell $1.50 to $34.31 Tuesday, but the shares hit bottom at $31.63, compared with their high of $153.42 over the past year.
Most analysts and companies believe that a slowdown in the telecom sector will cause telecom service providers like AT&T, WorldCom and Qwest to spend less money on equipment this year.
"I think more bad news will come out of the telecom equipment sector," said Jim Kedersha, an analyst at Adams, Harkness & Hill. "I just don't think that all the bad news is out yet."
For example, both analysts think that Nortel Networks might not have lowered its guidance for the year enough. Nortel said last week that earnings and revenue for the year would only grow in a range of 10 percent to 15 percent.
On Jan. 18, the company told investors that it expected to grow earnings and revenue by 30 percent for the year.
Heger points out that spending grew tremendously last year and that the pendulum is swinging back toward the other extreme and will find an equilibrium point in the near future.
Optimists will also argue that the sector and the economy as a whole is experiencing a temporary glitch and that the environment should improve by the second half of the year.
Kedersha says that this might be true, but that no one really can predict whether or not that will happen on time and that investors will have to play a waiting game until then.