Some struggling telco vendors turn to IT

Matt Walker/Ovum
Ovum
Telecom-centric vendors are having a tough time, again. In the past several quarters margins have decreased significantly; 4Q12 earnings issued to date have not reversed the trend. Even with some consolidation and extensive layoffs, several big vendors are hurting.
 
A weak capex climate among service providers has worsened the outlook, as has the continued growth of Huawei. Ovum’s latest forecast calls for capex bumps in some country markets, but Chinese vendors are positioned well in many of these, raising barriers for their competitors.
 
In the near term, vendor earnings should be watched closely, with an eye on both margins and cash conservation. In the longer term, vendors must position themselves to thrive as the IT and telecom worlds converge. This blending will impact network design, product choice, sales models, purchasing decisions, and ultimately the competitive landscape.
 
What is a telecom vendor, anyway?
 
It’s getting hard to define a “telecom vendor.” Only a few specialist vendors sell exclusively to service providers. Most have a wider range of products and services and sell at least some of them to enterprises and consumers. Software-defined networks (SDNs) and software-enabled features, from the mobile RAN to the optical core, are rising in importance.
 
The IT and communications worlds are coming together as service provider networks evolve to be more software-centric and network intelligence migrates to the data center. Yet this is happening slowly, like all change in carrier networks. For now, there remains a camp of distinctly telecom-centric vendors, led by the big five – Ericsson, Huawei, NSN, Alcatel-Lucent, and ZTE – plus Cisco, which has a unique balance of telecom and IT, followed by dozens of smaller players. For many of these companies, times have been tough since the financial crisis hit in 2008.
 

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