Tero has a new article on TheStreet.com about the magnitude and ramifications of Ericsson's and Nokia's dominance in the WCDMA infrastructure market for the competition. Strangely, he doesn't mention Nortel, another casualty in the making.
thestreet.com
A passage from his column:
Knockout Rounds Approach
Why the raw desperation? In recent months, the 3G-infrastructure market has been congealing around the largest suppliers, leaving smaller vendors gasping for air. They'll need to commit huge research and development resources to stay in the game, even though they may have only a fraction of the leading players' sales. Fujitsu and NEC have been forced to fuse their network operations with those of Alcatel and Siemens in order to remain in this space. These Japanese companies are now publicly attacking European vendors, even though their 3G efforts now depend on being junior partners to Alcatel and Siemens, decidedly European companies.
During the next year or two, the hissing and clawing among telecom vendors is only going to worsen. The W-CDMA market shares of Alcatel, Motorola (MOT:NYSE - news - commentary) and Lucent (LU:NYSE - news - commentary) are stalled, and the companies will likely try to withdraw gracefully. However, the Japanese are in the tightest spot. Their domestic infrastructure market just isn't large enough to support all of the domestic vendors.
For many companies, it's too painful to withdraw from the W-CDMA market. Even if a vendor has only three or four genuine W-CDMA orders, it has to do the same R&D work as vendors with 30 or 40 orders. Landing a few orders is considerably worse than not getting any because it locks the vendors into deliveries on which it can never make a profit.
Consider this fact if you're evaluating the long-term outlook of telecom infrastructure vendors that aren't in the top three. Most analysts who follow the wannabe vendors haven't calculated the losses associated with keeping these R&D programs on life support.
A slow arrival of W-CDMA would make it easier for the biggest companies to handle a simultaneous increase of 30 customers, while pushing the break-even level for smaller players beyond the horizon. Lucent and Motorola are apparently walking into this trap rather than cutting their losses. Japanese vendors don't even have the option of avoiding it. |
