NEW YORK ( TheStreet) -- Investors placing bets in the long term growth potential of telecommunications equipment makers such as Ciena (CIEN - Get Report) and Juniper (JNPR - Get Report) have to first hope that carrier spending from the likes of AT&T (T), Verizon (VZ - Get Report) and Comcast (CMCSA) will return to their previous lofty levels.
Carriers Not Carrying Their Weight
However, with their spending having lacked confidence all year and looking less likely to rebound, I'm starting to wonder if a stock such as Acme Packet (APKT) which has been all over the map this year can still produce the premiums its current multiple suggests -- particularly for the fact that roughly 80% of its revenue comes from carrier spending.
Both of those companies have been shown to care more about other forms of capital reinvestments such as share repurchase programs and less on equipment. But investors have shown to not care.
Instead, on Tuesday, the stock surged more than 7% closing at $18.87 with no positive news other than Acme announced the date of its third-quarter earnings report Oct 25.As a leader in session delivery network solutions, the company does have a pretty good chunk of its market, but its management showed little confidence that it can sustain its revenue levels by having cut guidance in its second-quarter report. What's more, rivals such as Ciena, Adtran (ADTN - Get Report) and Alcatel-Lucent (ALU) have shown no growth momentum as each have been awaiting an anticipated second half surge in carrier spending that has yet to materialize. And likely won't. So it would seem investors in this sector and in particular those causing the surge in Acme Packet on Wednesday are possibly waiting in vain.