Nokia Rings In Wireless Rally

The frozen tundra of telecom network spending is at last showing signs of a thaw.

A downtrodden industry's outlook heated up Thursday with two big events: Nokia's (NOK) sizzling fourth-quarter forecast and Verizon's (VZ) steamy $1 billion wireless upgrade plan.

Even pessimists who'd like to see more evidence of a rebound were willing to believe Thursday that spending in the battered network infrastructure sector might finally have reached bottom.

Shares of wireless gear suppliers like Nokia, Ericsson (ERICY), Qualcomm (QCOM), Lucent (LU) and Nortel (NT) all rallied Thursday as Wall Street rushed to get good seats on a potential recovery ride. After a couple frosty years of budget slashing and network expansion delays, there is a growing sense that the industry's hardest season has passed.

"The wireless infrastructure market is tough to gauge, but my guess is that we'll see a rolling bottom this year," says Osborne Partners money manager Justin McNichol, who is long Nokia.

Whistling Wireless Nokia surges...

...and rivals follow

While Nokia's report of surprisingly strong fourth-quarter networking-equipment sales helped encourage the recovery camp Thursday, more prudent types pointed to the confluence of one-time events pivotal to the big Finn's upside surprise.

"Three positive factors came together for Nokia," says McNichol. He cited low year-end expectations, stronger-than-usual seasonal demand and lots more sales of higher margin products, says McNichol.

Still, if questions remain about whether Nokia will see sustained demand, Verizon Wireless provided an answer, sort of.

The nation's largest cell-phone service provider said it was pushing ahead with data network upgrades, and raising its capital spending plans by $1 billion over the next two years. That marks the first upturn in telco spending in three years, and could help prod rivals to dust off their own expansion efforts.

Verizon's plans likely will be detailed in March during an industry conference, but people familiar with the project say Lucent and Nortel will split the orders, with slightly more going toward Lucent.