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Technology Stocks : Ericsson overlook? -- Ignore unavailable to you. Want to Upgrade?

To: elmatador who wrote (5094)	10/18/2002 8:00:43 AM
From: Jim Oravetz	Read Replies (1) \| Respond to of 5390

Savior 3G May Be at Fault For Weak Networking Sales Third-Generation Mobile Networks Are Hurting, Not Boosting, Sector By DAVID PRINGLE Staff Reporter of THE WALL STREET JOURNAL Sales of third-generation mobile networks were meant to have rescued Telefon AB L.M. Ericsson, Nortel Networks Corp. and other ailing equipment suppliers by now, but the complexity of the technology is holding back sales. Mobile networks makers had hoped 3G technology's efficiency at handling large amounts of data would be enough to persuade Europe's heavily indebted operators to upgrade their networks. Ericsson, Nortel, Nokia Corp. of Finland and other suppliers have been shipping 3G equipment to scores of operators in Europe and Japan for well over a year, but the new technology has yet to boost sales. Rather than beginning to recover in the second half of 2002, as equipment suppliers had hoped, a sales warning from Ericsson on Monday suggests the mobile network market still is shrinking. Analysts say operators aren't buying 3G network equipment in significant volumes because it is unclear when they can obtain a range of compatible handsets. For example, Vodafone Group PLC's Swedish unit said this week that it can only launch 3G services when there is a "good supply" of 3G phones available. Industry executives say, handset makers are struggling to develop phones that can cope with all the different permutations of Europe's 3G technology, known as WCDMA, or wideband code-division multiple access. Bjorn Krylander, chief executive of British networks-testing company UbiNetics, says the WCDMA standard allows equipment suppliers to choose how to perform specific tasks, such as switching a call from one base station to another. That means individual WCDMA networks behave differently. "The complexity was pretty staggering in the first place," Mr. Krylander says. But he adds, "A handset also needs to support all these different options." Also, the new phones need to be able to switch between 3G systems and existing networks, since most operators aren't planning to build 3G networks in rural areas. These complications are making life awkward for handset makers, such as Nokia and Motorola Inc. of the U.S., trying to sell WCDMA phones. When Nokia unveiled its first 3G handset last week, Anssi Vanjoki, executive vice president of Nokia's mobile-phones division, said the company doesn't want to ship the handset in large volumes until it can be sure the WCDMA standard isn't going to change significantly. "This testing has to be completed, truly completed, before it makes sense for any manufacturer to launch," he told a news conference in Helsinki last week. Although Nokia has booked €500 million ($491.9 million) from selling 3G network equipment in the third quarter, it still expects to report a 5% decline in sales in its networks division in the quarter, down from €1.66 billion a year earlier. J.T. Bergqvist, executive vice president of Nokia's networks, says the company has booked revenue related to shipments of 3G infrastructure to only a handful of the 42 operators who have received the new equipment. It will only book the revenue once it can prove the networks can perform a range of tasks. Mobile networks only account for about 20% of Nokia's sales. But Ericsson and Nortel, which rely far more on the infrastructure market, desperately need 3G revenue to help compensate for a dramatic decline in sales of second-generation equipment. Both companies recently warned that they expect to report a sequential decline in sales in the third quarter from the second quarter. Scott Wickware, director of WCDMA solutions at Nortel, acknowledges 3G shipments for the second half of 2002 aren't going to be in line with what his company was projecting 12 months ago. But he maintains all new wireless standards are held back by technical teething problems. A spokeswoman for Ericsson said the company still believes 3G equipment will count for 10% of its revenue this year. "We are not surprised by the slow rollout of 3G," she added. But analysts maintain that lackluster sales of 3G equipment mean that there is little chance of the global mobile-networks market stabilizing next year, as Ericsson is forecasting. Industry executives acknowledge that WCDMA is still a work in progress. Tony Milbourn, managing director of British handset designer TTP Communications PLC, says the WCDMA standard won't be completely finalized until "three or four" handset makers have their phones working well on networks from "three or four" different suppliers. "It could be one and a half to two years before everything is hunky-dory," he says. The European mobile-phone industry had similar hold-ups with the launch of GPRS, or general packet radio services, technology, a forerunner to WCDMA. Different equipment makers also interpreted the GPRS standard differently leading to compatibility problems for operators and consumers. Nokia, waiting for the technology to mature, didn't launch its first GPRS handset until about a year after the first networks went live in mid-2000. In fact, the industry is only now launching services that allow customers to use the GPRS functions on their handset when traveling abroad.