Think you've suffered through enough of this equipment spending slowdown? Well, you ain't seen nothing yet, one Wall Street bear says.

His message: Don't fall for any head-fakes from

Cisco

(CSCO) - Get Cisco Systems, Inc. Report

or

Nortel

(NT)

or any of the networking gearmakers that have come 80%, even 90%, off their historic highs and, to some bullish eyes, look poised to jump.

The downturn in spending, most recently documented by

Corning

(GLW) - Get Corning Inc Report

in a

Thursday afternoon earnings warning, has only just begun and will be with us for at least another year, says

Sanford Bernstein

analyst Paul Sagawa. That's because telecom bankruptcies are hurting spending in two ways: reducing demand, and flooding an overserved market with barely used gear.

Big Drops

A quarter into the year, Sagawa has seen the bankruptcies and the

spending trends

play out. He's now saying capital spending will fall as much as 20% this year and an additional 15% next year before any kind of recovery will take hold.

"The April numbers are much worse than we originally noted," Sagawa said in an interview Thursday, referring to the spending levels revealed in various telco earnings reports. "Even though the carriers are saying 12% to 16% reductions, we think it will be more like a 15% to 20% decline in North America for overall capital expenditures. My strong bias is toward the negative end of that scale."

Sagawa rates Cisco,

Motorola

(MOT)

TheStreet Recommends

and Nortel hold. He has a buy on

Lucent

(LU)

and an underperform -- sometimes known as a sell -- on

Ericsson

(ERICY)

. Sanford Bernstein does no underwriting.

Sagawa, once an unshakable bull on Lucent, became one of the first on the Street to turn bearish on all of the equipment suppliers. Last fall he

broke from convention and suggested that capital spending -- the money that phone and Internet companies pay for new gear -- would grow less than the widely expected 20% for 2001.

At the time, negative sentiment like that was considered almost ludicrous as investors piled money into anything optical or Internet infrastructure-related. But many equipment analysts have since joined Sagawa's camp. This week, for instance,

UBS Warburg's

Nikos Theodosopoulos, who had often struck a negative tone in his research notes,

dropped his ratings across the board, to hold. And it bears noting that back in August,

TheStreet.com

was

waving a red flag as telcos were suddenly coming up short on their equipment budgets.

Aggravation

Sagawa is set to take his research out to clients Friday, and one of the points he is stressing in his doomier, gloomier prediction is that bankruptcies will aggravate the situation as more nearly new gear pushes into the market through auctions.

Qwest

(Q)

has said there are great deals to be found from distressed sellers, and reported finding

networking systems in unopened crates.

"This will have a two-stage impact," Sagawa said. "Companies go bankrupt and bankrupt companies don't spend money on equipment. The secondary effect is that the debt holders will sell the networking equipment assets to other carriers.

"So instead of spending $1 billion on new optical equipment, they'll go out and buy it used and only end up paying 30 to 40 cents on the dollar for it," Sagawa said.