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December 15, 2008

Troubled Economy Creates Ripple Effect for Telecoms


Nortel, the largest telephone equipment maker in North America, recently watched its share price drop to about 40 cents. The telecommunications giant also revealed its third-quarter revenues were down 14 percent year-over-year, forcing a lay off of 1,300 workers.



 
Senior Analyst for ABI Research, Nadine Manjaro, believes a decrease in revenues for Nortel (News - Alert) is directly related to several current industry trends.
 
A recent study from ABI Research (News - Alert), “Mobile Network Vendor SWOT Analysis,” took a closer look at the strengths, weaknesses and strategies of some of the world’s largest wireless infrastructure providers. The report provides insights into why rough economic times affect some companies more than others.
 
“Nortel is strong when it comes to the enterprise, but recently they have made a lot of investments aimed at winning business from service providers, efforts that have not really taken off because of an unclear strategy and changes in operators’ technology choices. That was an ominous situation, which the global recession has now made more serious,” Manjaro explained.
 
Global communications solutions provider, Alcatel-Lucent has not been faring well in the current economic climate either, but the company is working on enhancing its performance and achieving higher ratings from financial analysts after a corporate overhaul and a change of top leadership. Motorola’s (News - Alert) share price is also increasing thanks to re-structuring and shifting focus into stronger market segments.
 
So, what exactly is causing these otherwise successful companies to undergo corporate revamps and adopt new strategies? ABI Research says that the recession for these major providers does not mean that network operators are canceling or delaying infrastructure projects. Telecoms are actually doing better than many other industries, and while operators reduce spending, so far the cuts have mostly been operational rather than on infrastructure.
 
“It’s about decisiveness and execution. Take a company like Ericsson (News - Alert): they’re not doing great business, but their share price is still around $8.00. Their strategies are clear, and they benefit greatly from their emphasis on providing managed services as well as hardware. All vendors are struggling, but some more than others, and this market will weed out the weaker players,” added Manjaro.
 
ABI Research’s latest study, “Mobile Network Vendor SWOT Analysis,” provides analysis of the strengths, weaknesses, opportunities and threats facing many of the top network infrastructure vendors. It examines the companies’ financial results, including investments in research and development, product line diversity, geographic sales distribution, and long term strategies.
 
As a market research firm, ABI Research is focused on the impact of emerging technologies on global consumer and business markets. With a unique blend of market intelligence, primary research, and expert assessment from its worldwide team of industry analysts, ABI Research helps hundreds of clients each year with their strategic growth initiatives.


Michelle Robart is a contributing editor for TMCnet. To read more of Michelle's articles, please visit her columnist page.

Edited by Michelle Robart





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