At the Bottom?

As I write this, we are still in the turmoil of the largest financial crisis since the great depression of 1929-39.  The stock market has lost more than 50% of its peak value and many companies are on the verge of bankruptcy.

Yet somehow I sense things are turning around.  There are too many people pressing for improved lives around the world – especially in India and China where 30%+ of the world’s population live – to allow the rest of us to slide down the hill too long.

For Finisar, the company I founded some 20 years ago, in their recent conference call they noted that they expected this quarter to be the last negative growth one and for there to things to improve from this point.  They even noted that orders in February and early March are higher than their forecast they presented that day.  This is an unusual statement for Steve Workman and Jerry Rawls who, like me, are conservative mid-western folks to their cores.

Finisar’s sense of the bottom certainly is based on the fact that the Internet is still growing.  Thing about it for a minute.  How much video did you watch using Internet transmission technology 2 years ago?  How much do you watch today?  Against that time frame it is easy for many people to see that today they watch quite abit and just a couple of years ago it was practically zero.  Video places extreme bandwidth needs on the Internet.

Back in 2005, I published a series of articles on the Finisar web site which showed that our sales of optical transceivers were experiencing a growth rate of 10x every 4-5 years.  I measured this growth rate in “megabits per second shipped per month per person on earth” or Mb/s /mo /poe.  Sometime in 2005 we were at approximately a unit of 1 on this scale.  This meant that Finisar shipped enough 2 Gb/s and other optical transceivers that every person on earth was given another 1 million bits of data per second or bandwidth say in June and then another one in July and August and …

But I also showed that this figure had been growing for us and predicted that it woudl grow by 10x by about 2008/9 and also that this growth would be driven by video on demand over the Internet.  And as VoD has happened, so has the prediction of 10x increased bandwidth shipped by Finisar to its customers.  So it all continues.

And now there are parts of the internet that are clogged up and the way to fix this is to add more Bandwidth!  So we will have to have increased sales to large customers like Cisco and Brocade to have the Internet be able to sustain its growth.

But what about other industries.? it seems to me that those who have strong fundamental support for their futures will thrive.  These certainly include new infrastructure for the USA, solar panels, energy efficiency products like new lightbulbs and such.  But luxury items that really have no part in the rapidly evolving future – Hummers,  private planes, wildly speculative investments – those will likely be mainly relegated to the past.

If I am right, then this will be a real first for the USA as well for some time.  We are not driving the world but the world is helping us.  I hope we can be open enough to see this.

Posted in Essays, Investing, Personal Stories

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