Telecom Market Transformation

The top eight telecom equipment manufacturers in 2000 remained the same as in 1999, but increasingly diverging strategies resulted in a changing of the guard, according to Dataquest.

by ISP-Planet Staff [March 9, 2001]

According to market research released by Gartner Dataquest, the top ranked telecom equipment manufacturer for 2000 is Ericsson, posting $31.3 billion in sales, predominantly due to its leadership in the wireless network market.

Toronto-based Nortel Networks Corp. gained ground to land the number two spot as the world's second most dominant telecom equipment manufacturer. Gartner Dataquest analysts said Nortel had a great balance of leading edge technology skills and executed well in the high-growth optical market. Analysts accredited much of Nortel's performance on increasing demand for optical technology gear.

Ericsson rival wireless equipment-maker Nokia, moved into the third spot from fourth in 1999 with telecom revenues of $27.2 billion. Nokia had strong growth based on its mobile terminal business in 2000, but Gartner Dataquest analysts said growth is likely to soften over the next few years.

The 1999 market leader, Lucent Technologies, dropped to fourth for raking in $25.8 billion in 2000 revenues. A major reason for Lucent's slide from the No. 1 to the No. 4 spot was the spinning off of Avaya, although it still had a difficult year.

Lucent 2000 figures exclude Avaya; combined figure would be $33.2 billion. Siemens, Alcatel 1999 figures are estimated. Source: Gartner Dataquest (February 2001)

Cisco Systems ascended to the number five position, up from its eighth place finish in 1999. The company reported telecom revenues of $23.9 billion in 2000. Cisco had the strongest growth among the top eight vendors, but Gartner Dataquest analysts warn that growth for the company will not continue at the same rate in its core businesses. The company will need to modify its strategy if it is to continue its strong growth rates.

Siemens AG, Motorola, and Alcatel round out the big eight of global equipment firms averaging annual sales about $22 billion each.

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The timing of the ranking, however, comes amid a clampdown in spending by phone companies and Internet service providers that has sparked a rash of earnings warnings and crumbling stock prices. Right now, customers are increasing traffic on existing network equipment they have already purchased, rather than buying new gear to meet future demand.

Dean Eyers, Gartner Dataquest worldwide telecom and networking group vice president, said whether there is an actual recession or not, there will be a paring back in 2001, which will be a year in the telecom sector.

"We expect slowing demand for services, reduced and delayed investments in networks and applications, patching rather than overhauling or replacement of enterprise networks, and the disappearance of some customers," Eyers said.

Eyers advised that if top equipment manufacturers want to keep moving through the doldrums, they need to focus on execution of a clear strategy, target the needs of the important customers and understand that this is a long-term business.

"Help your customer through the tough times, and you'll both be there on the other side," Eyers said. "Do not assume your customer wants to be left alone, but rather talk to them regularly. While overall spending levels will reduce, some budgets are 'use it or lose it,' demanding that telecom manufacturers accelerate the sales cycle in both their interests and their customers' interest."

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