Consolidation in the Telecom Equipment Market?
Is the telecom equipment market finally poised to consolidate? Maybe
it's about to happen amid a report in the Wall St. Journal
that
Ericsson plans to acquire Marconi's networking equipment business for
$2.1 billion. Mind you, this
will be a small dent in the supply side of the telecom market that has
become increasingly competitive and margin-thin with the rise of
low-cost Chinese
suppliers (and possibly Indian players in the future as the market
develops and suppliers such as Nortel and Nokia establish local
manufacturing operations through partnerships and joint ventures.) As Om Malik quickly pointed out earlier today, Marconi's future became unclear earlier this year
when it failed to win any of BT's $19 billion next-generation network
contract - a huge blow given Marconi was a key supplier to BT. Given
Ericsson's focus on the wireless business in recent years, it will be
interesting to see how the acquisition of the Marconi business fits
into Ericsson's strategic plans. And while Marconi sort of being taken out of the market is interesting, the
real action will be quasi-tier one targets such as Lucent and Nortel.
Lucent is
clearly the more obvious candidate (Alcatel?) given it doesn't have any
of the accounting, financial and management woes of Nortel. Then again,
there have been plenty of rumors about Siemens and Nokia sniffing at
Nortel so maybe the Ericsson strategic thrust will encourage/inspire
other big moves.
