Mobile network infrastructure vendors start to feel the heat

Nortel’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, Nortel’s low fortunes are symptomatic of several current industry trends.

A recent study from ABI Research, titled Mobile Network Vendor SWOT Analysis, examined the strengths, weaknesses and strategies of the world’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,” said Manjaro, “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.”

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. Motorola’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, stated Manjaro. 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.

“It’s about decisiveness and execution,” Manjaro concluded. “Take a company like Ericsson; 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.”