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Four analysts and top management from twenty-two sector firms examine the communications services sector in this special 98-page Comunications Services issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info470.htm.

TWST: Gary, I’d like to ask you the same question with regard to the communications equipment industry and the areas that you focus on. How has the communications equipment side weathered 2001?

Mr. Mobley: It has been one of the worst performing sectors in the entire stock market, and I think justifiably so. The worst areas within communications equipment have been companies that focus on providing dense wavelength division multiplexing (DWDM) transport equipment to the optical long-haul backbone carriers. And as Rick mentioned, there seems to be an oversupply of bandwidth in the long-haul portion of the networks, so that’s where the sharpest decrease in capital spending budgets has been. Access, of course, is then hurt by the emergence of competitive local exchange carriers and the subsequent drop-off in those carriers with unfunded business models. It’s going to take some time for consolidation to occur and for those assets to be utilized. I think the areas that offer the most upside to current expectations, in terms of carriers spending on capital equipment, would be wireless and cable.

TWST: How do you explain the fact that demand for bandwidth was overestimated to such an extent?

Mr. Mobley: Internet usage was one of the big drivers of demand for bandwidth, along with corporations buying private lines, additional lines or T 1 lines. And because the economy has been as weak as it has, demands on the corporate side certainly dropped off, and, of course, Internet usage has matured. At one point, bandwidth demand was growing well over 100% year over year, and recent estimates have put demand for bandwidth growing at only 25% to 30% year over year.

TWST: Gary, where should an investor start who is looking to go back into the communication equipment stocks begin?

Mr. Mobley: That's a fair question. There are many, many companies that I follow that address both the communication service providers as well as the enterprise segment of the market, enterprises being large corporations, government agencies and educational systems. Cisco (CSCO) has not done as good a job in addressing the communications service providers as they should have, and even they admit that. Instead they have had a bread-and-butter business in the enterprise segment. I would focus on a company like Cisco, which is more leveraged in the enterprise market because given a recovery in the economy, I think enterprise spending will return sooner than carrier capital spending will. So I would focus on those companies, such as Cisco (Nasdaq:CSCO), Check Point (Nasdaq:CHKP), Symantec (Nasdaq:SYMC) and Extreme (Nasdaq:EXTR), that have more leverage to enterprise spending. Going along with the theme of increased enterprise spending, given an economic recovery, I think that Check Point is a name worth focusing on. Check Point supplies firewall and virtual private network (VPN) security. As it relates to carrier spending, virtual private networking is the service piece carriers offer, and it’s something that’s in great demand. There are two different business models — a company can either do it themselves or they can outsource it to a service provider. Either way, Check Point benefits.

This special issue includes:

1) Communications Services & Equipment - In an in-depth (4,500 words) Analyst Interview, Rick Franklin & Gary Mobley, both Senior Industry Analysts at Bank of America Capital Management, examine the outlook for the sector and share specific stock recommendations.

2) Emerging Communications - In an in-depth (4,100 words) Analyst Interview, Vik Grover, Managing Director at Kaufman Bros., L.P., examines the outlook for the sector and shares specific stock recommendations.

3) CLEC & Incumbents - In an in-depth (4,300 words) Analyst Interview, Thomas Morabito, First Vice President/Senior Telecom Analyst at McDonald Investments, Inc., examines the outlook for the sector and shares specific stock recommendations.

4) CEO interviews (average 2,500 words). Top management of twenty-two sector firms examine the outlook for their firm and the sector.