The telecommunications equipment industry continues to battle weak demand for new infrastructure and strong competition for handset sales, causing many to predict sector growth will appear at the earliest in 2004.
Ericsson of Sweden, which released results on Friday, restated its goal of an operating profit by the end of the year, but will stay in the red overall owing to $1.3 billion in costs related to its restructuring plan. On Thursday, Finnish rival and leading telephone maker Nokia sent tech markets reeling with news its handset sales would be unchanged or lower for the rest of the year.
Nokia Chairman Jorma Ollila expected the market to remain flat in 2004 and said the next growth phase would come in two to four years. Analyst John Chapman of the Gartner Institute said “we’ve seen during the last couple of years a significant decline in equipment manufacturers’ revenues. Year 2003 is going to be a new year of decline, between 5-10 per cent of revenues, and 2004 might be flat.” Gartner does not see a rebound before 2005. In Britain, Marconi said that conditions remained difficult. “Our markets remained very difficult during the quarter,” said Marconi Chief Executive Mike Parton, while insisting there were some hopeful signs for the future.
In addition, Korean companies Samsung or LG are providing stiff competition though price cuts. “Asian equipment manufacturers have been very aggressive with the prices,” said Chapman. “They compete with each other on the local markets, and they fight to pressurise the prices not only on the mature markets (Europe and the US) but on the emerging ones” as well. Another analyst commented “the market in Europe has already arrived at maturity. The switch from GSM technology to third-generation phones is just beginning”.