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Weak Global Econcomy & Slow Business in China Has Negative Impact on Alcatel-Lucent and ZTE
Tue, 07/17/2012 - 14:39 — Alan WeissbergerAlcatel-Lucent underlined the bleak outlook for itself and much of the telecoms equipment sector by disclosing second-quarter operating losses of €40m and abandoning yearly profit targets. The company cited a “slower than expected business mix improvement". Alcatel-Lucent also said that while it expects the second half of the year to be better than the first, it will not now meet its previously-announced adjusted operating margin guidance for 2012. It noted a “difficult macro-economic environment".
According to Odon de Laporte, an analyst at Credit Agricole Cheuvreux cited by Bloomberg, the company has also been impacted by slow business in China. During the first quarter, the company noted “extremely weak” sales of GSM equipment in China, due to the timings of the sales cycle.
www.mobilebusinessbriefing.com/articles/alcatel-lucent-warns-on-weakness/24603?elq=2a834f68289f43f0a86e70927f1c2d27
Financial Times offerered an even bleaker assessment for Alcatel-Lucent prospects this year:
www.ft.com/intl/cms/s/3/40dd8db6-d008-11e1-bcaa-00144feabdc0.html#axzz212LYe1kO
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ZTE's Shenzhen-listed shares closed down 2.82 percent Tuesday after dropping by the maximum daily limit of 10 percent Monday and its Hong Kong-listed shares also dropped 1.53 percent after a 16.32 percent slump Monday.
The Shenzhen-based firm said late Friday that its net profit would total 154 million to 308 million yuan ($24.4 million to $48.9 milliion) in the first half of 2012, dropping 60 to 80 percent year-on-year from 769 million yuan in 2011.
ZTE attributed the profit decline to considerable investment returns in the first half of 2011, foreign exchange losses and order postponement by domestic telecom operators.
"Our performance in major businesses is better in 2012 than the previous year," Dai Shu, spokesperson of ZTE China, told the Global Times Tuesday. "If we deduct the 900 million yuan earnings by selling Nationz Technologies Inc's shares in 2011 and 150 to 200 million yuan foreign exchange losses resulting from the eurozone crisis."
ZTE would grow faster than the average growth of the industry in 2012, Dai projected, noting that the company would release its semiannual report in August. However, the firm has to face worsening market environment and industrial bottlenecks, analysts said. Dragged by the global economic downturn, telecom operators around the world postponed their projects and investments, and the trend is unlikely to reverse in the short term, said analyst Chen Yunhong from Sinolink Securities.
Technology research firm Gartner predicted that the global telecom sector would see 2 percent expansion in 2012.
Media reports said many ZTE staff have been recalled from overseas postings since early this year and further job cuts would be announced within the year.
www.globaltimes.cn/content/721664.shtml
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Gartner: Robust growth for telecom equipment spending, tepid growth for telco services, PC sales flat
Thu, 07/12/2012 - 19:41 — Alan WeissbergerTelecom equipment spending could rise 10.8 percent to $377 billion this year, according Gartner Inc. The prestigious market researct firm forecasts that growth will continue throughout 2013 when spending will increase by 8.3 percent to $408 billion.
"While the challenges facing global economic growth persist—the eurozone crisis, weaker U.S. recovery, a slowdown in China—the outlook has at least stabilized. There has been little change in either business confidence or consumer sentiment in the past quarter, so the short-term outlook is for continued caution in IT spending," said Richard Gordon, research vice president at Gartner.
However, telecom services spending will not fare nearly as well, according to Gartner. 2012 telco service growth will only be 1.4% this year to $1,686B. And 2013 growth will still be paltry at 2.3% to $1,725B. The global telecom services market continues to be the largest IT spending market. Telecom services growth is expected to come not only from net connections, especially in emerging markets, but also in mature markets from the uptake of multiple connected devices, such as media tablets, gaming and other consumer electronics devices.
Telcos could also reap some benefits as more businesses and govenment agencies start to adopt cloud computing services. Gartner predicts that enterprise spending on public cloud services will grow from $91 billion worldwide in 2011 to $109 billion in 2012 to reach $207 billion in 2016. That's somewhat surprising since other market research firms predict more robust growth for private cloud services, due to concerns about performance, security and failure recovery.
For more info please see the press release:
www.fiercetelecom.com/press-releases/gartner-says-worldwide-it-spending-pace-surpass-36-trillion-2012
Atleast telecom spending on equipment and services is doing better than PC spending. Worldwide PC sales remained virtually flat in the second quarter, according to a new Gartner report.
Gartner principal analyst Mikako Kitagawa said in a statement that the PC market in Q2 "suffered through its seventh consecutive quarter of flat to single-digit growth." Kitagawa attributed the key reasons for this sales performance to economic uncertainty in some regions and a dropping interest on the part of consumers for PCs.
www.sci-tech-today.com/news/Global-PC-Sales-Flatline--Gartner-Says/story.xhtml?story_id=030003CLS2I6
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SMBs Look to Hosting Companies for Cloud Computing Services
Thu, 07/05/2012 - 13:23 — Michael WeissAMI Partners Report:
According to AMI Partners (www.ami-partners.com/), hosting companies -- pure-plays, telcos and MSOs -- will provide nearly half of the cloud services purchased by U.S. small and midsize business. The firm predicts SMBs will have invested a total of $34 billion in the cloud by the end of the year. According to the report, hosting providers such as telecom firms, MSOs and pure-plays are uniquely suited to handle the high level of customer service demanded by SMBs because of their long history of providing Web access solutions to the sector.
"A key reason that hosters are becoming a leading cloud channel for SMBs is because they have proven they can effectively handle critical infrastructure, while providing the necessary level of support," said Monik Sheth, research analyst at AMI-Partners. "Poor service can be an immediate deal breaker for any company, and SMBs are no different."
AMI Partners is including telecommunications providers (telcos and cable companies) in the "hosters" category is because many of the solutions offerings are beginning to overlap, especially around IaaS and related cloud offerings, Sheth told Channel Partners. "Telecom firms are making strategic plays in the hosting space, as you can see for example by M&A activity among major telecoms in the U.S. (e.g..Verizon acquiring Terremark and Time Warner Cable acquiring NaviSite)," he said.
SMB cloud services spend includes investments in IaaS, SaaS, web hosting, UC and remotely managed IT services. Two areas where AMI Partners found SMBs see clear benefits, and are aggressively moving to the cloud, are hosted infrastructure, such as servers and storage, and remote management of IT systems and related applications. That's because SMBs have very limited, if any, internal staff dedicated to managing technology, so deploying these solutions in the cloud, with the support of a trusted provider, is quickly becoming the norm, the research firm explained.
References:
www.ami-partners.com/index.php?target=news&mode=details&news_id=287#287
www.channelpartnersonline.com/news/2012/06/telcos-msos-hosters-to-get-half-of-u-s-smb-cloud.aspx
TELECOM-PRO Comment:
We see Savvis-Century Link and Terremark-Verizon as the telco leaders in providing cloud services to SMBs. Of course, that's why Century Link and Verizon acquired those two formerly independent companies! It remains to be seen what competive telcos will do in the cloud space. Those include: TW Telecom, Level 3 Communications, AboveNet, XO Communications, Windstream, and Globe Telecom (amongst others).
Meanwhile, MSOs (multiple system operators) are becoming a bigger threat to telcos in the business end services and wholesale market, as more SMBs and wireless operators (e.g VZW) look for alternative providers to meet their needs. We see Comcast Business as particularly strong in Carrier Ethernet and VoIP to SMB, but they haven't announced anything definitive for cloud computing.
Perhaps, it takes web hosting and IT service management expertise that's beyond the reach of most telco's and MSOs.
What's your opinion?
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Telecom Revolution in India and the Government's Role in Making it Happen (or not)
Tue, 06/26/2012 - 20:20 — Alan WeissbergerNote: Please see comments at the end of this article for updates and opinions.
New Broadband Telecom Projects in India
The legendary Sam Pitroda presented the closing keynote speech at TiECon 2012- The Indus Entreprenneurs annual conference. Sam is a pioneer in design and development of digital switching technologies (in the 1970s) and the man behind India's telecom revolution (in the 1980s and '90s). Mr. Pitroda is currently Adviser to the Prime Minister of India on Public Information Infrastructure and Innovations. A technologist, inventor and entreprenneur, Sam initiated India's telecom revolution in the 1980s and sparked India's outsourcing boom in the late 90s. In 2007, IEEE ComSoc awarded Mr. Pitroda the award for Public Service in the Field of Telecommunications. (www.comsoc.org/about/memberprograms/comsoc-awards/telecom/bios)
A comprehensive article on Mr. Pitroda's speech appears in the July 2012 issue of IEEE Global Communications Newsletter, which is published in IEEE Communications magazine.
ieeexplore.ieee.org/stamp/stamp.jsp?tp=&arnumber=6231274
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Sam believes that Public Information Infrastructure is critical for driving innovation and entrepreneurship, as well as for improved delivery of public services and accountability.
The first step in modernizing India's IT infrastructure is the National Knowledge Network (NKN). This high speed fiber optic network will interconnect all educational and research institutions in India (including 22,000 colleges) as well as global research networks in the U.S., EU, Singapore and Japan. Its goal is to enable real time collaboration and research. The target users for the NKN are institutions engaged in the generation and dissemination of knowledge in various areas, such as research laboratories, universities and other institutions of higher learning, including professional institutions.
NKN has already connected 774 institutions (as of 26 May 2012) and aims to connect over 1500 Institutions/ Organizations /Laboratories throughout the country. The network design is based on a proactive approach that takes into account future requirements and new possibilities- in terms of both usage and perceived benefits. The NKN is characterized by a 40G bit/sec fiber optic backbone, multiple 2.5/10G fiber add/drops, and a total of 1500 nodes. It's projected cost is $3B.
Another government funded fiber optic network is being built to connect 250K Panchayats (local government bodies) in India. Broadband connectivity to these rural Panchayats will improve delivery of public services and empower village residents (which make up 70% of India's population). It will transform eGovernance, education, health, hospitals, and agriculture. The India government launched this rural broadband program in late October 2011 under the Universal Service Obligation Fund (USOF) to increase broadband penetration in rural and remote areas.
At these Panchayats there will be a cell tower and other related infrastructure for all public and private operators to share facilities for proving last mile wireless services to rural customers. Broadband wireless access will consists of a mix of 3G/4G cellular, mesh WiFi, and WiMAX. Those wireless access networks will be interconnected to India's fiber optic backbone for extended reach and a multiplicity of services.
This fiber optic network to Panchayats has a projected cost of $6B and will be totally operational in two years time.
In May 2012, Indian Television's Digital Edge reported: "A total of 1,47,463 ( 59.49 % ) out of a total of 2,47,864 village Panchayats had been covered with broadband connectivity as of March 2012.
A rural Wire-line Broadband Scheme has been launched under Universal Service Obligation Fund (USOF) to increase broadband penetration in rural and remote areas. Under this scheme, BSNL will provide 8,88,832 wire-line broadband connections to individual users and Government Institutions over a period of five years. As on March 2012, a total of 3,58,978 broadband connections have been provided."
www.indiantelevision.com/headlines/y2k12/may/may24.php
Perspective and Conclusion
While lots of people say government should get out of the way and let the private sector take over industrialization and information infrastructure in India, Sam believes that most companies won't take on those projects due to uncertain ROI and capital expenses. In sharp contrast, the Indian government now has the political will to move forward with its innovation agenda.
Let's hope so.
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Here are three incisive comments from very respected sources, plus this author's opinion and a rebuttal:
1. Madhu Pitke, an IEEE ComSoc member for several years who is helping expand its activities in India
"Communication in India has been, until recently, under the total control of government. In the 90s, with the liberalization of the economy, mobile communication has caused a revolution in India. There are probably be more than 700 million mobile phones now. The main reason has been affordability. However, broadband communication has yet to make significant inroads into the village.This is changing rapidly with the emergence of new low cost technologies and the several initiatives undertaken by the government. Fiber networks have reached areas that are within a 10 to 20 km from a large section of the 600,000+ villages. A new Gigabit National Knowledge Network - NKN (Sam Pitroda's initiative) is being set up to provide broadband connectivity to schools and other educational institutes throughout the country. NKN is also expected to play a key role in taking the broadband to the villages. This is further aided by the goverment's plan of making available low cost tablets (Aakash) for around $ 50 to each school student.
The problem to be tackled is providing an affordable, user friendly access solution which in my opinion is already on the horizon. About $50 of fixed cost per connection and a monthly rental of about $5 for unlimited use of the broadband (2+Mbps). I hope to write a separate article on this some day.
Meanwhile, it's true that the Panchayats (local government bodies) are responsible for providing (wireless broadband) connectivity to the villages.... ultimately."
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Alan's comment on Panchayats providing last mile wireless broadband to the villages: I don't believe they have the IT/wireless telecom skills or experience to select and deliver the appropriate wireless broadband access network along with the compatible/ matching wireless devices from different vendors. Even if they did complete the job, the result would likely be a proliferation of technologies and frequencies used throughout India, which would make it prohibitively expensive to standardize on mobile devices for the villagers/population. Those wireless devices (fixed or mobile) would have to be ultra low cost as villagers don't have income to pay $500 or more for a smart phone/device.
Sam Pitroda's rebuttal: Here is an attempt to clarify the confusion raised about Panchayat provided last mile wireless broadband access to villages in India.
About the role of IEEE ComSoc (by Madhu): "It has helped the communications engneering and academic community (including the students) well informed of the progress in research and development and prepared them for dealing with future challenges through the large number of conferences, workshops and lecture meetings throughout the country."
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2. Suhas Patil, a colleague and friend of Alan's for almost 30 years, Prof. Patil set up Alan's 6 week business development trip to India in Nov-Dec,1990. A former Professor at MIT and the University of Utah, Suhas is the founder of Patil Systems (later renamed Cirrus Logic) and the CEO/Chairman of Cradle Techologies (with offices in Puna, India and Mt View, CA).
"Lots of success for India's telecom revolution, but credit for it should not go to the Indian government. They came to opening the communication segment kicking and screaming. The advocacy role that TiE (and maybe US government) played in persuading the Indian government to open this segment. Again, there are Department of Information and Electronics changes in the (government issued) rules that play havoc with investment. The Ministry of Finance is now proposing a retroactive tax, which would be very damaging to those who have taken the risk of investing in India (infrastructure developement)."
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Editor's Note: A recent article in the NY Times corroborates Mr. Patil's view expressed above, especially regarding the proposed retroactive tax.
India’s ‘Telecom Revolution’ Turns Ugly, May 4, 2012
Facing new regulation and retroactive taxation, telecommunication companies in India are revolting – foreign companies are pulling out of the country, local executives who were once cozy with government are publicly condemning official policies, and several operators are suing or threatening to sue the Indian government.
“We have probably the most destructive regulatory environment virtually since the inception” of this sector, said Sanjay Kapoor, chief operating officer of Airtel’s South Asia operations, during a meeting Thursday of telecommunications operators in New Delhi organized by the Cellular Operators Association of India. “The recommendations are flawed and retrograde, regressive and uncertain in a fashion that it would irreparably harm consumer interest.”
India’s Finance Ministry said during the budget announcement this year that it plans to retroactively tax foreign acquisitions into India, a plan that seems aimed at Vodafone of Britain, which could owe several billion dollars. Vodafone is fighting the Indian government in international courts, and other foreign companies, including telecom operators, could follow suit, deal-making experts say. Vodafone’s chief executive attended the Wednesday meeting but did not speak publicly.Already, telecom operators are shutting shop in India.
india.blogs.nytimes.com/2012/05/04/indias-telecom-revolution-turns-ugly/
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Basant Khaitan, a life long colleague and friend of Alan's who spends considerable time in India with two start-up companies he's involved with there.
"India will become a large market but one has to have patience (relative to fast growing economies like China, Brazil, Russia, etc.) I have often said China is a country which has a high and different trajectory than others. The Indian Government should actively do whatever it can to provide for BB infrastructure. My considered judgment is India’s broadband subscriptions will grow about 15-20% a year. That's not a bad growth number by any stretch, but the current base is small for a country like India.
Even if Government somehow manages to implement the so called NKN I, personally, remain skeptical about dramatic growth in broadband use. Less than 4% of Indian households have broadband service. ARPU for most (500M+ out of about 650M) cellphone users is less than $4 per month); these users don’t have a smartphone and often are not capable of reading or sending a text message. I am not sure how many will just shell out even $5 extra each month for Internet which they barely know about. I am also equally skeptical about $50 tablet. It is also one of those government hypes; over-promised and grossly under-delivered! I sent my application online to get one about 8 months ago. As of today, I have not even received an acknowledgment of my application. My Indian friends are living the same experience.
The problems are education and cultural including leisure time. Much of growth in Internet usage is due to the educated class (high school or beyond). Corporate use is also growing but it is asymmetrical. Government sector including many government-owned industrial enterprises have also been quite slow to adopt Internet. For every Sam Pitroda you will come across at least 20 senior officers who barely use the Internet."
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References:
www.sampitroda.com/index.php?option=com_content&view=article&id=21&Itemid=127&lang=en
iii.gov.in/
iii.gov.in/index.php?option=com_content&view=article&id=283:broadband-to-panchayats-whitepaper&catid=49:reports&Itemid=37
railwaymodernisation.gov.in/
iii.gov.in/index.php?option=com_content&view=article&id=286&Itemid=205
www.panchayats.in/
www.indianchild.com/panchayats_system_india.htm
www.indiatechonline.com/it-happened-in-india.php?id=616
www.indiantelevision.com/headlines/y2k12/may/may24.php
www.iloveindia.com/indian-heroes/sam-pitroda.html
telecomlead.com/inner-page-details.php?id=8828&block=News
india.blogs.nytimes.com/2012/05/04/indias-telecom-revolution-turns-ugly/
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Cisco to increase Market Share in Developing Countries hit by Global Economic Slowdown
Mon, 06/25/2012 - 15:27 — Alan WeissbergerCisco Systems will take advantage in the current slowdown in telecom-equipment spending by investing in emerging markets to expand its market share, CEO John Chambers told CNBC on June 22nd.
The information technology company's business is growing in some emerging markets and Cisco is taking a longer-term approach than the next few quarters to see the results of its investment, Chambers said in an interview at the St Petersburg International Economic Forum.
Cisco invested in Russia over three years ago and its business in the country grew by 50 percent last year and it has increased "in the high teens" so far this year, according to Chambers.
"You can actually pick up more market share gains when things are slowing or right before they're picking up than you do in normal times, When we see things starting to slow in an area that's actually when we may invest more aggressively," Chambers said. "We see the emerging economies not only as being able to grow … faster than our traditional business but we see them as an opportunity for us to begin to talk about how do you change the whole economy," he added.
While developed countries' governments did cut spending on IT around 15 months ago, continuing to reduce investment in the area is not a good strategy for these governments because the quality of their services such as healthcare, education, security of defense would drop, Chambers said.
Read the complete article & watch the interview at: www.cnbc.com/id/47916867
Comment:
We were disappointed that Chambers did not name the technologies for the emerging markets that Cisco is investing in. As Cisco has no presence in wireless infrastructure (other than mesh WiFi) or mobile computing, we wonder where the company will pick up market share.
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Healthy Growth in N.A. Home Networking Devices led by MoCA (Multimedia over Coax)
Sat, 06/23/2012 - 17:29 — Alan WeissbergerIntroduction:
Infonetics Research recently released excerpts vendor from its latest Home Networking Devices market share and forecast report.
HOME NETWORKING DEVICE MARKET HIGHLIGHTS:
•Global sales of home networking devices grew 20% in 2011 from 2010, to $7.98 billion
•Infonetics expects a cumulative $43 billion to be spent on home networking devices over the 5 years from 2012 to 2016, as the growth of tablets and other devices in home networks necessitate additional connectivity options
•MoCA (multimedia over coax) embedded set-top boxes (STBs), FTTB optical network terminals (ONTs), coax-Ethernet adapters, and WiFi broadband routers are driving growth in home networking device market
◦Cable operators and telcos in North America, especially Verizon, are increasingly using MoCA devices to deliver services like whole-home DVR
•D-Link extended its revenue share lead in the highly competitive broadband router market, followed by NETGEAR and Cisco
ANALYST NOTE
“Tablets, connected TVs, digital media players, and a growing list of other devices are driving sales of home networking devices, and this is nowhere more apparent than in North America, which captured 37% of networking device revenue in 2011,” notes Jeff Heynen, directing analyst for broadband access and video at Infonetics Research. “We expect the demand for broadband peripherals, especially those with integrated MoCA chips, to continue to increase globally as operators in all regions roll out new home automation, energy management, entertainment, and communications services that require high-end networking devices.”
To buy the report, contact Infonetics Sales: www.infonetics.com/contact.asp.
Comment & Observations:
It's interesting to note the dominance of MoCA over HomePNA in Home Networking, despite it's higher cost. HomePNA operates in the 4-36 MHz frequency range, whereas MoCA runs over a 50 MHz wide channel in the 975 to 1525 MHz range, which requires a (presumably) more expensive RF components. MoCA home networks use existing coaxial cable in the home to send information between devices. In N.A. most homes are coax wired, and Verizon as well as MSOs are taking advantage of that to deploy MoCA.
We also don't see much of IEEE 802.11n or ITU-T G.hs deployed in home networks, despite the tremendous hype leading up to their respective standardization.
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Related Infonetics Report: Pay-TV Services and Subscribers
Infonetics Research released excerpts from its latest Pay-TV Services and Subscribers report, which forecasts and analyzes the telco Internet protocol television (IPTV), cable video, and satellite video services markets.
PAY-TV MARKET HIGHLIGHTS
. The global pay-TV market, including cable, satellite, and telco IPTV video services, totaled $261 billion in 2011 and is forecast by Infonetics to grow to $371 billion by 2016
. North America is again the highest-value video market due to high ARPU, but Latin America and Asia are gaining ground as a result of expanding subscriber bases
o Case in point: Mexico's América Móvil's pay-TV subscribers and revenue grew in the triple-digit percents in 2011 from 2010; KT's grew in the double-digits
. DirecTV and Comcast remain the global market leaders for pay-TV revenue and subscribers
o DirecTV enjoys the highest ARPU due to the high take rate of its value-added services and premium content such as the NFL Sunday Ticket
o Comcast is the global pay-TV subscriber leader, with over 22 million subscribers in 2011
. In 2011, the top 20 pay-TV revenue leaders accounted for 50% of the revenue, while the top 20 subscriber leaders represented just 30% of subscribers
ANALYST NOTE
"Cable video still makes up over half of the global pay-TV market, but revenue growth is decelerating due to a slowdown in new subscribers, especially in the lucrative North American market, as competition from satellite and IPTV operators intensifies and as OTT offerings from Netflix, Hulu, and others siphon away a small, but growing number of households," notes Jeff Heynen, directing analyst for broadband access and video at Infonetics Research.