I received thousands of emails last spring and summer (as I still do whenever I pan a stock) from telecom investors pleading with me to quit my bearish stance. They hated the medicine I gave: I said the telecom sector was tough, overbuilt and overcapitalized. "Get with the program," they pleaded. "These stocks are screaming buys."

They'd often cite renowned analysts like Salomon Smith Barney's Jack Grubman, who were writing glowing sector reports. (By the way, wasn't

The New York Times

piece

on him Sunday just a little outlandish and low?) "Who are you to argue with the brokerage analysts?" the emailers would ask. "How can you doubt Frost & Sullivan's market projections?"

All the while, of course, a telecom bubble was popping and reality was rushing in.

The New Reality

Finally, late September came, just a few weeks after the terrorist attacks on New York City and Washington, D.C. The markets were in a free fall; technology stocks had been taken out to the shed and left for dead. Telecom stocks, too, dropped double-digit percentages seemingly every day. The fundamentals of most telecom companies were bad and getting worse. The shock and helplessness that we all felt after Sept. 11 carried over into everyone's offices, and the

teleconomy dropped off a cliff.

When profitable companies traded down near book value, when companies with healthy balance sheets traded as if business were ruined forever, when the equipment vendors traded at levels that assumed the carriers would never buy a piece of equipment again, that's when I began to pound the table and go bullish. "The time for selling is past,"

I wrote, and boy, was it ever.

What to do with these companies now? It was easier to like

Tellabs

(TLAB)

at 1.2 times book value than it is now at about 2 times book value. And yes, it was easier to build a position in

Cisco

(CSCO) - Get Report

at $13 and to reiterate buying that stock at $16 than at $20. Man, did I love buying

ITXC

(ITXC)

when it was trading at

less than cash

.

Alas, those days are over -- probably for good. Though my picks will certainly see their ups and downs over the next few months and years, I doubt we'll ever see these stocks back to the levels they were when I first wrote about them. Estimates for these companies are in many cases finally low enough, and investors probably won't sell these stocks off to those levels in this part of the cycle.

The Next Steps

So what am I doing now? I still like and own all of the stocks I've recommended. I told readers of

RealMoney's

Columnist Conversation to trim their

Micromuse

(MUSE)

at $12, and then I

suggested buying more of the stock at $9. Now at $15 and change, with the stock up a cool 157% in just eight weeks, it's time to take some off the table again.

Cisco is still humming along, and I expect the stock still has legs on it. Business is probably better than most of the Street expects. I'll sell some at $23 or $24.

Enterasys

(ETS)

, another

reiteration of mine on Oct. 30, is also steady here. While I think it's OK to take a little off the table from the second buy, I wouldn't be selling much. The company is still on track to spin off its Aprisma subsidiary by year-end, and its enterprise switching business is doing just fine.

Tellabs, which is making the right moves with regard to capacity and employment (that is, cutting them), has lingering questions about its next product cycle. The biggest question, of course, is whether it can leverage its existing dominance of the Titan 5500 line and dominate the next generation of cross connects with the Titan 6500 line. And can someone please tell me the logic behind its wasting of precious R&D dollars and resources on its metro DWDM line? These questions, along with a 72% run-up since I recommended it, make a little profit-taking here sensible.

I still like

Advanced Fibre

(AFCI)

and

Comverse

(CMVT)

quite a bit here, and I wouldn't be a seller.

I'm still long ITXC, and although I recently sold a little, I sure wish it'd come back down a little so I could feel good about buying it back.

Finally, if you don't own any of these stocks (where were you for the past eight weeks?), building some small positions in Cisco, Enterasys, Advanced Fibre, Comverse and ITXC would be advisable. Still, I wouldn't recommend loading up the boat here.

Cody Willard is president of TelEconomics Consulting, a financial and technology consulting firm. He is also founder of

TelEconomics.com, a Web site devoted to news and analysis of telecommunications stocks. Previously, he was senior analyst for a venture development company, and before that was a partner at the Lanyi Research division of CIBC World Markets. At time of publication, Willard was long ITXC, Enterasys, Cisco, Micromuse, Tellabs, Comverse and Advanced Fibre, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Willard appreciates your feedback and invites you to send it to

cody@teleconomics.com.