Siemens One to Watch in UMTS

Siemens AG (NYSE: SI; Frankfurt: SIE) and Alcatel SA (NYSE: ALA; Paris: CGEP:PA) look well positioned to survive and thrive in the market for GSM and UMTS infrastructure, according to the latest edition of Unstrung's monthly paid research service, Wireless Oracle, which is available now. Although LM Ericsson (Nasdaq: ERICD) and Nokia Corp. (NYSE: NOK) look set to maintain their positions as market leaders in this market, at numbers one and two respectively, Siemens is suffering far less than its bigger rivals and gaining market share without increasing revenues. Alcatel, meanwhile, is building a business and a reputation from a base of low manufacturing and operating costs, and, although the company does not break out operating margins for its wireless networks business, "the company’s recent comments imply margins in excess of 10 percent," states Wireless Oracle research analyst Gabriel Brown, author of "Survival of the Slimmest: Competitive Positioning in GSM and UMTS Infrastructure Markets." And while Alcatel does not break out wireless from its carrier networking revenue line, in the recent third-quarter conference call, chairman and CEO Serge Tchuruk revealed that mobility, including switching and core networks related to mobility, accounts for around $3 billion in sales per year. In the table below, which shows the revenues from wireless network equipment for the top five players in the GSM/UMTS market, this is averaged out as $759 million per quarter. Table 1: Wireless Network Equipment Revenues per Quarter ($M)
1Q01 2Q01 3Q01 4Q01 1Q02 2Q02 3Q02
Ericsson 4,108 4,779 4,137 4,881 3,328 3,524 3,128
Nokia 2,046 1,919 1,879 1,980 1,453 1,492 1,564
Siemens 1,316 1,265 1,569 1,475 1,378 1,233 est. 1,200
Nortel 1,545 1,616 1,349 1,204 1,136 1,123 940
Alcatel Not available NA NA 759* 759* 759* 759*
Source: Company data, Wireless Oracle
* = averaged from annual figure

The table shows, from taking the most recent four quarters, that the annual market is worth $34.3 billion, though, as Brown points out, "this would flatter the GSM/UMTS market somewhat, since Nortel Networks Corp. (NYSE/Toronto: NT) in particular, and to a lesser extent Ericsson, also sell CDMA equipment." The most recent quarter saw these five firms collectively report wireless kit revenues of nearly $7.5 billion. On this basis Ericsson is easily the market leader, with Nokia second, and Siemens third. This makes the networks division of Siemens Information and Communications Mobile the "world’s number three wireless equipment vendor -- just edging out the leading CDMA vendors, Motorola Inc. (NYSE: MOT) and Lucent Technologies Inc. (NYSE: LU), which reported third-quarter revenues of $1,014 million and $882 million, respectively." Motorola, which generates 35 percent of its wireless equipment revenues from GSM, versus 42 percent from CDMA and 23 percent from iDEN, will be analyzed along with Lucent and other major CDMA suppliers in the next Wireless Oracle report. Brown believes Siemens has a relatively stable GSM business and has solid ground in the UMTS market through its partnership with NEC Corp. (Nasdaq: NIPNY). And he is "pleasantly surprised by the relative strength of Alcatel’s wireless equipment business. The focus on low manufacturing and operating costs is setting the trend for the competition." The report looks at the revenues, margins, prospects, and debts of these top five players, as well as the competitive threat they face from up-and-coming players such as Huawei Technologies Co. Ltd. and LG Electronics Inc. — Ray Le Maistre, European Editor, Unstrung The full report, "Survival of the Slimmest: Competitive Positioning in GSM and UMTS Infrastructure Markets," costs $400. An annual subscription to Wireless Oracle is ordinarily $1,250 but is currently available at the special introductory price of $899. For more information, including subscription information and research examples, please visit: Wireless Oracle.

Editor's Note: Light Reading is not affiliated with Oracle Corporation.
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