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Editor's note: This is the third installment of a multipart article on secular decline. Please check out Part 1 and Part 2! The final installment will be published on Friday morning.

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In December, the fact that Cisco (CSCO:Nasdaq - news - boards) and Nortel (NT:NYSE - news - boards) and Lucent (LU:NYSE - news - boards) were over-ordering was plain to see. That's when the secular decline vs. cyclical decline debate began. The bulls believed that when the shortages ended, there would be a buildup in inventory, but it would be a one- or two-quarter buildup that would then be worked off. That's a classic cyclical correction. These bulls believed that once Cisco and Lucent and Nortel returned to more normal order patterns, then the inventory bubble would be worked off and companies like PMC-Sierra (PMCS:Nasdaq - news - boards) and Applied Micro Circuits (AMCC:Nasdaq - news - boards) (principal suppliers) would snap back.

The bears, however, viewed the decline in orders as secular. They thought that the "normally robust order pattern" would not come back, because the customers were hobbled and couldn't order any more equipment. The bears held that we might be full-up with equipment for now and, if anything, we could go into a mode where we needed less and less equipment now that the phone companies were out of money. Believe me, if the only orders that mattered were the orders from Verizon (VZ:NYSE - news - boards) and BellSouth (BLS:NYSE - news - boards) and SBC Communications (SBC:NYSE - news - boards), then the cyclical boom would turn into a secular bust, because those companies just don't order equipment that fast.

The bulls figured that the cut in Fed rates would spur more end-customer demand that would then allow the 14 different phone companies to get back on their feet and start ordering again. There's the cyclical correction theory again. But the bears said that the 14 different phone companies were lucky simply to be able to refinance their debt and that no new money would be raised for equipment before the financing window closed again.

Last week was a seminal week, because the secular decline camp seems to have been declared the victor. The giant Orange deal, which was for a big French phone company, bombed, which meant that no investment house wants to risk raising money for any low-rated telecom company. Nortel signaled that the inventory correction is something much bigger. It didn't come out and say "secular decline," yet that's how it got read by Wall Street. Lucent seems to have vanished as a competitor overnight! And the distressed telecom companies started sinking toward their lows, confirming the "challenging" environment that Cisco had mentioned the week before.

The cyclical camp had its moments: Ciena (CIEN:Nasdaq - news - boards) saying demand was strong and the stock of Applied Materials (AMAT:Nasdaq - news - boards) not getting hit because it too said the decline was only cyclical in nature. By the end of the week, however, the market simply wasn't buying it.