Vendors Q2 results show danger of recession relapse

Matt Walker/Ovum
22 Sep 2010

Network infrastructure revenues for 35 telecoms vendors grew just 2.3% to $44.7 billion in 2Q10 over 2Q09, down slightly from the growth recorded in the previous two quarters.

Vendors’ wireline and services revenues are growing, but mobile is still falling year-on-year, reflecting the decline in telco capex. Several big vendors face more cost cutting and reorganization/M&A to become profitable.

Upcoming 3Q10 results need to be watched closely for further signs of a double-dip recession. Some vendors are positioned well for more hard times, including Juniper, Tellabs, Amdocs, and Tekelec, but many others remain at risk.

Service provider (SP) capex is the primary driver behind telecoms vendors’ network infrastructure (NI) revenues. Preliminary SP capex for the period ended 2Q10 was uninspiring.

On a rolling 12-month basis, capex fell 1.3% sequentially in 2Q10. Rolling capex has remained in the range of $260 billion to $280 billion for the last five quarters.

t hasn’t crashed, but remains under pressure. One factor is that pressure from Chinese vendors helps SPs get more for less; price competition is clearly a factor in capex weakness, as Huawei and ZTE gain share globally.

But not all regions follow the same trend. Variations stem from government intervention; spectrum licensing; multinational carriers such as Telefonica prioritizing spending by country; uncertain broadband regulations; and postponed spending due to M&A activity.

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