Telecom equipment shakeout predicted in 2002

Global competition drove a wedge in the cozy relationships between telecommunication and network equipment suppliers and the big businesses and telecommunication service providers buying their products, and it seems times are changing again.

Network equipment users will find fewer avenues to seek new equipment, as the big international vendors like Brampton, Ont.-based Nortel Networks Corp. and Motorola Inc. pull out of some markets to focus on their core lines of business, a market study from Stamford, Conn.-based Gartner Inc. predicted on Monday.

The changes within equipment companies will be radical. The packaging of Nokia Corp. or Cisco Systems Inc. may look the same, but underneath the businesses will be catering to a more select clientele of only the largest equipment buyers, leaving users with smaller pocketbooks to scramble for attention, said Bhwani Shankar, a Gartner principal analyst.

Gartner’s researchers believe vendors will cease attempts to become one-stop shops for all the network equipment needs of their clients, Shankar said. The eight largest telecom equipment providers – accounting for 80 per cent of sales – were the subject of the study, he said. And most of their telecommunication equipment sales came from the top 20 carriers worldwide.

“We looked at some of the publicly switched telephone network vendors like Nortel, who are wedded to their mainstream telecom clients,” Shankar said. In recent years, Nortel and other large telecom vendors have diversified into the router space, edge-network equipment and other enterprise-network gear.

“In a recessive economy, one of the things we’ve seen them doing is cutting back on the enterprise business,” he said.

Recent quarterly investor calls have borne this out with abounding examples. Nortel said it would focus on long-haul optical and metropolitan-area networks (MAN) and wireless equipment, leaving out enterprise network gear. Motorola sold off its Multiservice Networks Division (MND) earlier this year. Lucent Technologies Inc. exited the fixed wireless, cable access and small competitive local exchange carrier optical systems businesses, and has withdrawn from some enterprise markets.

Vendors are also retrenching geographically, with European vendors slashing North American staff and vice-versa. The largest vendors still intend to compete intensely for Asian telecommunication service provider market share, however. Unlike the historically close ties phone companies have with their regional equipment providers in Europe and North America, Asia remains relatively open.

“It’s an open battlefield that’s closing very, very fast. There’s going to be far too much competition in far too short a time,” Shankar said.

Mobile equipment makers are depending on their customers to build 3G markets relatively soon, with the weight of carriers’ huge debts ready to crush the fortunes of their equipment suppliers, Shankar said. A major investor or carrier pulling out of the high-speed mobile data services gamble could delay implementation by months or even years as the remaining investors struggle to replace that stakeholder, he said.

The longer it takes to achieve critical mass with consumers, the more likely it is that carriers won’t be able to service the billions of dollars in debt undertaken to purchase licenses and equipment. If the wireless service providers go bankrupt, it could doom mobile equipment vendors.

However, the shifting market will have an overall positive effect for consumers of this network technology, Shankar said. The efforts of equipment makers to spread out into new markets “was an artificial bringing together of skills that didn’t exist in the company,” he said. Telecom equipment makers struggled to make routers, while enterprise equipment makers labored to build switches. “Customers weren’t getting the best-of-breed in the technology … some (executives) were making sacrifices in quality to get a better deal from a single vendor.”

Gartner, in Stamford, Conn., is at

Would you recommend this article?


Thanks for taking the time to let us know what you think of this article!
We'd love to hear your opinion about this or any other story you read in our publication.

Jim Love, Chief Content Officer, IT World Canada

Featured Download

Featured Articles

Cybersecurity in 2024: Priorities and challenges for Canadian organizations 

By Derek Manky As predictions for 2024 point to the continued expansion...

Survey shows generative AI is a top priority for Canadian corporate leaders.

Leaders are devoting significant budget to generative AI for 2024 Canadian corporate...

Related Tech News

Tech Jobs

Our experienced team of journalists and bloggers bring you engaging in-depth interviews, videos and content targeted to IT professionals and line-of-business executives.

Tech Companies Hiring Right Now