re: Could Huawei Buy Marconi?If Geoff is right that Huawei is 25% of traditional optical vendors - who else will get bit by them? Alcatel, Nortel, Lucent and others are all priced in similar ranges and will all face the pressure of competing below costs to maintain accounts. Successive new bids will begin lower and end lower than before.
Marconi is the start - but if Huawei can sustain their pricing models - they will own the PTTs and ILECS world wide - in time. If that assumption of very low pricing, for technically equivalent product, is true - who is next? Nortel and Lucent in NA?
By: INQUIRER staff Wednesday 04 May 2005, 17:15 MARKET RESEARCH firmm iSuppli said China is set to outstrip the USA in broadband subscribers during the next several years.
Figures it has published show that by the end of 2007, China will have 57 million broadband subscribers, compared to 54 million in the US.
He said America was the world leader in 2004 in the number of broadband residential subscribers, but in the last few years has "been plagued with regulatory issues" that have prevented the growth of such technologies.
Rago said that at the end of 2004, the US was 15th worldwide for broadband penetration. Nevertheless, last year, the US federal courts ruled against the unbundled network element platform (UNE-P) and George Bush recommended that Congress not tax access to broadband to stimulate its growth.
He said that the US has to do more, including minimising regulations on VoIP and video delivery and consider giving tax relief.
Isuppl provided a chart demonstrating the relative position of China and the US. -¦
re: Could Huawei Buy Marconi?Thanks to the morons that govern us, and their religious belief in the "magical hand of free markets":
China to beat US in broadband connections soon
Be careful not to play the role of a victim. "We the people" are part of the equation as well. It could be good if "we the people" came to an understanding about why the internet became what it is, and the guiding principles behind it.
What are LR readers beliefs on that?
I found the following observation particularly interesting and relevant. The entire thread can be found on
Mike's right in that the invention of the internet should not necessarily be dated to the invention of packet switching or IP and TCP.
I personally suggest that one of the magic ingredients which made the internet is what I call its cost contract. In other words, a billing invention rather than a technological one.
The internet cost contract is "I pay for my line to the midpoint, you pay for yours, and we don't account for the individual packets."
I pay my half, you pay yours.
This remarkable billing arrangement gave the illusion that the internet was free. People were paying for it but you could treat it like it was largely free. Other systems, including the X.25 network, and of course the PSTN, tended to have usage based accounting.
The internet grew because a flourish of people built strange and interesting applications, and left them open to access by the outside world. The early days involved everything from fishtank webcams to FTP repositories of software to online communities talking about the technical and the trivial.
On a network where you paid for traffic, as soon as an application got popular, there would be a bill. And a beancounter would get the bill and somebody would be called into an office to be asked, "Why do we have a huge bill for people looking at camera images of our fishtank?" And it would have been shut down. Likewise software repositories and much more. Only what could be demonstrably financially justified could have a good chance of thriving.
It is from this that msggroup, and FTP, and USENET, and archie, and gopher and eventually the WWW that people come to think of as "the internet" grew.
The ability to innovate at the edges is important, but the ability to play without accounting may have been even more important.
re: Could Huawei Buy Marconi?Well keeping in mind that a lot of us (readers of Lightreading) are making broadband as commodity as possible I cannot see how in the in the long run US can beat China (unless we put a ban on abortion and open wide the borders to immigration-:)). 1+ billion will be always > than +250million. Do I miss something in reading the numbers?
re: Could Huawei Buy Marconi?Comrades, It occurs to me that there's another option for Huawei. They already have a business relationship with Marconi, so in the short term why not simply outsource the implementation of the 21CN work to Marconi? Remember BT has a pretty aggressive timetable for 21CN, so Huawei will have to move quickly. And several people have pointed out that their current UK infrastructure is not sufficient for this level of business.
Meanwhile, Marconi will have to go through savage layoffs so Huawei can cherry-pick ex-Marconi people to boost their own capabilities. In an ideal world a company making layoffs will try to keep its best people, but when you're laying off 3,000 out of 4,500 UK employees you can bet that plenty of top-class employees will be offered redundancy packages.
At some point Huawei will reach a critical mass so that they can take over the 21CN themselves. By then they'll have won a bunch of new business to - partly thanks to the value of 21CN as a showcase and reference account.
re: Could Huawei Buy Marconi?Comrade Ibeenframed, The 25% I referred to may have been "predatory pricing" that Huawei was using to enter a market and gain reference accounts. But we all know their stuff is cheap, how cheap compared to the opposition is yet to be clarified.
There are two obvious trends we'll see happening in this context. First is that competing manufactures will move more and more of the cost of their production into "developing world" countries. This trend has been happening in production for years. But I'm talking about R&D - software development to India, hardware development to China, Singapore, Malaysia and S.Korea.
The politicians are openly talking about dominating the hi tech industry already...
But there's a second trend. The new markets that Huawei is targetting are in Europe and N.America. To sell into these markets they need to employ local personnel, and locals cost a lot more to employ than equivalent employees in China. At the moment Huawei is paying below industry average salaries - they could get away with that because of the telecom collapse, when any job was a good job. But projects like 21CN are already creating a scarcity of good technical and sales folks in the UK, and when European SPs kick off their next-gen projects the same will happen in the rest of Europe. Cisco and Juniper are already hiring again here in the UK, and startup activity is busier than I've seen since the bubble burst. So Huawei's cost of sale in their target markets are set to rise, but they've already set expectation levels for equipment costs.
Bottom line - unless Huawei deals with the "cheap and cheerful" perception they could run into margin pressure soon. So the race is on for Huawei to build a customer base in Europe and N.America before their competitors manage to drive down costs through offshore R&D, as well as the current offshore production.
IMHO Cisco is in the best position. They have managed to retain ludicrously high margins, while the street price of Cisco equipment have fallen. Of course it's the reseller who has taken the margin hit in this case, not Cisco. This leaves plenty of margin for Cisco to play with, but Chambers knows that dropping prices will ruin his PE ratio, which will in turn hit the stock price.
Marconi is the start - but if Huawei can sustain their pricing models - they will own the PTTs and ILECS world wide - in time. If that assumption of very low pricing, for technically equivalent product, is true - who is next? Nortel and Lucent in NA?