Editor's Note: Cody Willard's column runs exclusively on RealMoney.com; this is a special free look at his column. For a free trial subscription to RealMoney.com, click here. This article was published April 5 on RealMoney.

You can just feel the panic setting in.

Nortel's

(NT)

debt was downgraded to junk Thursday, and the stock is now below 4 bucks.

Comcast

(CMCSK)

and

AOL Time Warner

(AOL)

both hit 52-week lows Friday. But there's more.Accounting problems and/or insider-benefit sleight-of-hand from

Gemstar

(GMST)

,

Adelphia

(ADLAC)

and

Enterasys

(ETS)

have created a dark cloud that looms over the teleconomy, scaring investors. Still, there's more.

The Nasdaq Telecom index is within 3% of a five-year low. Every telecom article you read is filled with negativity and pessimism. No one wants to read about or talk about telecom stocks (especially if they still own some!). In general, the market's just about disgusted with telecom. Thank goodness!

Cheering the Negativity

Such pessimism is exactly what we'll need to put in a good bottom here. We had a similar situation back in late September and early October, and, boy, did we catch a move to the upside. The move was too much too soon, of course. Although the companies' fundamentals were better than the stocks were indicating at the bottom, they weren't enough to support the stocks' valuations after their huge run.

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Let me be perfectly clear: The teleconomy isn't going away. Indeed, business is stabilizing for the healthy carriers, and money is being spent on equipment. The incumbent network operators have much of their networks running near capacity. This means that they'll have to spend real money on upgrading and adding more capacity to those networks.

Where the Winners Might Be

The incumbents in major metropolitan areas, like

Verizon

(VZ) - Get Report

and

SBC

(SBC)

, are sifting through requests for proposals (i.e., bids) for equipment to build out several of their metro networks, which connect disparate telecom switching offices within each city.

According to published reports, these contracts are currently in the upper nine figures, though the winners of the contracts will be well positioned to see more purchase orders following such a win. In other words, these contracts are likely worth much more than the purported nine figures, as the winners could see up to twice as much in sales.

Editor's Note: Cody Willard's column runs exclusively on RealMoney.com; this is a special free look at his column. For a free trial subscription to RealMoney.com, click here. This article was published April 5 on RealMoney.

I expect Nortel to win SBC's contract and

Lucent

(LU)

the Verizon one. Nortel and Lucent have both supplied metro gear to these carriers before and have relatively good working relationships. Heck, if nothing else, we can expect the ILECs to throw these guys a bone and get them some revenue on the books to help keep away the sirens of total bankruptcy.

However, SBC might give

Cisco

(CSCO) - Get Report

a shot, too. Cisco's sales force has been doing a very good job of cozying up to the ILECs, and it won't be long before Cisco will begin to see some orders, even though I don't see it happening this time around.

Of course, there are real problems in the teleconomy, and many bankruptcies still loom. But money is changing hands, deals are being done and bandwidth demand, while less than the analysts wanted us to believe, is still growing. Times are tough for many telecom sectors, and these stocks won't double anytime soon. For some time now, I've liked some stocks here from a long-term perspective, but the negativity and fear in the marketplace now are good ingredients for a near-term bounce.

Cody Willard is a telecom and financial analyst/consultant. He is also founder of

TelEconomics.com. Willard has co-managed $150 million in private investment funds and has headed up the research and analysis division of a venture development company. He has founded several telecom and technology companies and has managed the wholesale division of a $100 million CLEC. At time of publication, Willard was long Comcast, Enterasys, Verizon, SBC and Cisco, 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.