Where's the Squeeze?
Here's the state of play. The consensus among the major vendors, based on their conversations with carrier customers, is that the value of the global market for infrastructure and associated software, systems, and professional services, is going to be roughly the same as in 2009. Yet we have a few companies –- notably Huawei Technologies Co. Ltd. and Nokia Networks -- projecting, with some confidence, sales growth in 2010. (See Huawei Doubles Profits in 2009, Huawei Claims 2009 Revenues of $21.5B, and NSN Shrinks Again, But Q2 Looks Rosier.)
This suggests a few basic potential outcomes.
First, that the overall market will actually grow, much to everyone's surprise and joy.
Right. And maybe I will win the lottery and fulfill my lifetime ambition to farm chickens and read the top 1,000 classic novels. Let's set dreams aside.
Secondly, those companies predicting growth could be mistaken -- though I doubt that.
Thirdly, that some of the other large players, such as Ericsson AB (Nasdaq: ERIC) and Alcatel-Lucent (NYSE: ALU), might feel the heat and see a decline in 2010 revenues. Again, I think that's unlikely: Ericsson looks very strong at the moment -- we'll see how it started 2010 tomorrow (April 23) when it reports its first quarter -- and AlcaLu appears to have stabilized.
The most likely outcome is the fourth, and it's a bad one for the industry -- that the mid-sized and smaller vendors will take the brunt of the big players' growth, and, as a result, will be able to compete even less with the muscle of the leading handful of players that can offer a mix of hardware, software, and supporting services (especially managed services).
I hope I'm wrong, but all the signs point toward a widening gap between the vendor premier division and the rest of the market in 2010.
— Ray Le Maistre, International Managing Editor, Light Reading