Telecom And Networking Firms Begin Long Crawl Back; Analysts See Recovery Coming; Still, they remain cautious; spending on telecom gear won't return to '90s levels.(INTERNET & TECHNOLOGY)

Byline: MIKE ANGELL

Two stock research firms say the time's ripe for telecom gear and data networking vendors. While investors shouldn't break out the champagne, companies in the very battered telecom gear sector may be worth another look.

Of course, telecom spending won't reach 1990s levels soon. There are still too many suppliers and too few customers. But the industry is looking more stable. Telecom networks are mostly sticking to their capital spending budgets, and the Federal Communications Commission might give telecoms incentives to upgrade their networks.

"We're not saying there's going to be widespread relief for the industry," said W.R. Hambrecht & Co. analyst Reginal King. "But there are some companies doing well in certain niches."

In a recent report, Hambrecht said the communications gear industry "has found its bottom and is poised for a continual, albeit somewhat choppy, rebound."

That favorable report follows another from Salomon Smith Barney. Both say telecom networks have not been cutting their spending forecasts as much as they did last year.

At the beginning of last year, North American wireless and telecom networks forecast they would spend $70 billion in improving their networks, according to Lehman Bros. estimates. They ended up actually spending $52 billion.