COMMENTARY -- Monday ramblings:
The idea sounded great four years ago. "The CLECs are banking on one thing: that when given a choice of local phone companies, many consumers will happily abandon the RBOCs..." declared an article written back in 1997.
To some extent that occurred, mostly among businesses instead of consumers. But by and large, the biggest beneficiaries of the 1996 congressional act were not the CLECs, but rather the ones expected to suffer the most. The Big -- SBC Communications (NYSE: SBC), Verizon (NYSE: VRZ), Worldcom (Nasdaq: WCOM) -- got bigger, while the many of the scrappy underdogs did little other than pile up debt. Turnstone Systems (Nasdaq: TSTN) investors are now paying the price for the CLEC rage.
Dot-com and CLEC worlds suffered from the same basic problem: they're not offering anything special.
The huge morass of online content meant that no one stood out except early players like Yahoo! (Nasdaq: YHOO), or supremely good marketers like America Online (NYSE: AOL). Same thing happened in communications, as several companies sprang up and started building fiber loops. One tally puts the number of publicly-traded CLECs at 45, and there are plenty of private ones.
Even if these companies are "local" in nature, there's no reason to have that many communications providers in the United States. Not every CLEC will disappear -- bigger ones like Allegiance Telecom (Nasdaq: ALGX) are likely to hang around -- though I wonder if there's truly a need for any of them, given the pace at which larger players (including the likes of Qwest and Level 3) are expanding.
But enough CLECs will go down to paint an ugly picture.
Some news reports allege that Iomega is going up today because of a new distribution deal with IBM (NYSE: IBM). But the big move in IOM happened last week on Friday, when more than 7 million shares moved on no announcement at all.
I might be inclined to think that word leaked out early, except sudden volume surges without news have happened several times in the last three months. More than 3.1 million shares on Aug. 8. About 4.25 million on Aug. 21. Almost 10 million shares combined on Aug. 30 and 31, following a relatively minor announcement that Iomega's Clik! line would be rebranded as PocketZip.
Iomega picked up half a point as 5.2 million shares changed hands Sept. 11 after the board approved a stock buyback, but lost much of that gain the next day on even greater volume.
Another heavy, newsless burst drove up IOM from Sept. 18 to 20, before the stock gave it all back and then some on Sept. 31 -- the same day the company introduced a new digital audio player. One more surge at the end of September and the first week of October before the stock moved down for the rest of the month, despite an Oct. 12 report of better-than-expected third quarter results.
Optimists would say the stock is breaking out now after month of regrouping, following a successful September run. Perhaps people are accepting Iomega as a turnaround story; certainly the company appears to be in much better shape than it was a year ago. That's not saying much, but however you look at it, Iomega doesn't appear to be on life support anymore.
But I wouldn't become excited unless today's level is sustained this week. This might just be another instance of traders' games.
Take today's Day Ahead TalkBacks as an example. A year ago, people would have been outraged at any criticism of a highly-touted chip vendor like Transmeta. Today more posters are scoffing.
You don't want to overdo it, obviously, because then you might miss out on a run; say all you want about Yahoo! (Nasdaq: YHOO) and its advertising businesses, but there was a lot of money to be made on it in the late ྖs.
But by and large, skepticism is good. Doubtful investors force companies to produce more meaningful results, and that's better for everyone in the long run. 22GO>