Mobile Network Infrastructure Vendors Starting to Feel the Heat

NortelÃ's share price recently dipped to about 40 cents. While ABI Research in no way singles out the beleaguered network equipment vendor as worthy of particular criticism, according to senior analyst Nadine Manjaro NortelÃ's low fortunes are symptomatic of several current industry trends.

A recent study from ABI Research examined the strengths, weaknesses and strategies of the worldÃ's major wireless infrastructure providers. It provides insights into why bad economic times affect some companies more than others.

"Nortel is strong when it comes to the enterprise," she says, "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 operatorsÃ' technology choices. That was an ominous situation, which the global recession has now made more serious."

In contrast, Alcatel-Lucent was doing poorly too, but is now improving its performance and gaining higher ratings from financial analysts after a corporate revamp and a change of top leadership. MotorolaÃ's share price is on the rise too due to re-structuring and shifting focus into stronger segments.

Does the recession mean that network operators are cancelling or delaying infrastructure projects? Not necessarily. Telecoms are actually faring better than many other industries, and while operators may cut spending, so far the cuts have mostly been operational rather than on infrastructure.

"ItÃ's about decisiveness and execution," Manjaro concludes. "Take a company like Ericsson: theyÃ'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."

Posted to the site on 15th December 2008