Tellabs was a high flyer during the telecom and networking bubble of the 1990s and early 2000s. Now it is being sold for proverbial nickels and dimes to a private equity firm that is building up an optical portfolio, betting on a new boom.
Mobile operators may be key players in the mobile data revolution, building its broadband networks. But in the eyes of the markets, the telcos are seen as utilities, while their Valley counterparts are the ‘true’ high-tech innovators. A new study claims operators can change this.
If you’re a BlackBerry or iPhone user (see: addict), then you are partly responsible for the great Internet buildout. Those cute apps that look up baseball scores or let you log into Facebook eat up enough bandwidth to put the backend infrastructure of phone companies under pressure, forcing them to upgrade their networks with new and fancy gear. I’ve described this as the great Internet buildout and it’s one of the main reasons we’re seeing a wave of mergers and acquisitions in tech land. Read More about Why the Great Internet Buildout Is Spurring M&A
[qi:___3g] By now you all know that despite the spotty coverage and expensive rate plans, I am a big fan of Mobile Internet. Down economy or not, I want my 3G wireless connection. Apparently I’m not the only one. According to a survey of 50,000 wireless customers in the U.S. and five major Western European mobile markets, nearly 71 percent of wireless users are likely to use some kind of wireless data services. These countries collectively have about 200 million mobile data users and more than half expect to increase their mobile data usage. The survey was conducted by Nielsen on behalf of telecom equipment maker, Tellabs. Read More about No Stopping the Mobile Internet Growth
The current economic slowdown is beginning to hurt telecom equipment makers, and their prospects aren’t likely to change much in 2009, as indicated by the spending plans outlined by some of the major service providers.
For instance, AT&T (s t) said that it will cut its capex spend by 10-15 percent, or about $3 billion, and moderate its U-verse expansion plans. Verizon (s VZ) hasn’t been quite as blunt about its plans, but analysts expect the company to tighten its belt as well, and its suppliers are already starting to feel the hurt. Router maker Juniper Networks (s JNPR), for example, which counts Verizon among its customers, says it’s expecting lower revenues during the coming months. Read More about Slowdown Hits Telecom Gear Makers Hard
The problems at Alcatel-Lucent are not unique to the Franco-American communications equipment maker. Instead they are part of a bigger disease that ails some of the older gear makers in the West, which are being squeezed by low-cost Asian rivals, fewer buyers and massive shifts in the technology landscape. Continue Reading
Oracle’s (ORCL) unsolicited $6.67 billion bid for BEA Systems (BEAS), deemed not enough by the prey, is a sign that the era of mid-sized software companies is coming to an end. Ben Worthen, who writes the wonderful Wall Street Journal’s The Business Technology Blog, sums it up nicely:
The only obvious losers in this deal are other midsize software companies and their customers. Between SAP’s acquisition of Business Objects earlier this week and the potential BEA deal, it’s clear that the era of the midsize software company is over. The big guys need to grow, and the only way they can continue to do so is by buying smaller companies. This should cause uncertainty at mid-size software companies, which is never good for customers.
Like software, another industry that is crying for a similar consolidation is telecom. There have been few deals such as Ericsson’s (ERICY) $2 billion purchase of Redback Networks, or Nokia (NOK) teaming up with Siemens to form Nokia-Siemens Networks (NSN), but those are not enough.
While the number of carriers, a.k.a. customers, has gone down drastically, the number of hardware vendors hasn’t changed much. The power is now in the hands of incumbent carriers, who can afford to play off increasingly desperate telecom equipment makers. A few senior executives have acknowledged this in private conversations.
Recent trials and tribulations of smallish vendors such as Tellabs (TLAB) and Adtran (ADTN) have borne the brunt of the blowback from carrier consolidation. And there are many more such mid-sized companies that are in the vise-like grip of the incumbents.
One of the reasons why we haven’t seen the rise of a consolidator is because telecom has a history of botched pairings. With the exception of Cisco Systems (CSCO), no one has shown any ability to absorb companies with even a modicum of competency. Look at the post-merger Alcatel-Lucent (ALA) and you get my drift.
Maybe telecom needs its own Larry Ellison! Anyone?