Recession Expected to Hit Telecom in Second Half

Communications Equipment, Software to Absorb Biggest Impact

For instance, two years ago, “green” savings weren’t even part of the sales lexicon. That has changed, Ladam said. If service providers and vendors can show numbers “that say something as boring as electrical usage is going to pay for itself over an 18-month period,” enterprises and SMBs may well bite.

Time-tested approaches will help, too, insiders said.

Providers and vendors need to “keep a very keen eye on reaching out and being extremely focused on customer care and customer retention,” Vilandrie said. That doesn’t have to mean price reductions, he added. Instead, that can include strategies such as bundling.

Still, vendors and even some service providers are girding for circumstances to get even tougher and are working to do more with fewer resources. For example, Hewlett-Packard is laying off 24,600 employees. Sony Ericsson is cutting 450 workers in North America. Nortel Networks Corp. (NT) is looking to sell off its Metro Ethernet Networks division and steadily has fired people throughout this year, as have Alcatel-Lucent (ALU), Nokia Corp. (NOK) and Sprint Nextel Corp. (S).

Will Consolidation Follow?

So does this weakness ripen the market for takeovers? Hard to say. Some insiders believe this is a good time for international companies to buy North American tech assets. (Speculation about Huawei and Nortel comes to mind.) Still, said one source, such a purchaser would run into the same problem current owners face – that customers are holding back on spending, so an investment would take longer to pay off.

However, with the U.S. dollar weak compared to almost every other currency, and with the United States’ status intact as the financial capital of the world, there are “lots of reasons why international investors might be interested in U.S. assets,” said Vilandrie.

Ladam, though, believes there might be more opportunity for domestic private equity firms. Consider the models set forth by the Silver Lake-TPG takeover of Avaya, the TPG-GS Capital buyout of Alltel Corp., and the Platinum Equity purchase of Covad Communications Group. “A lot of them do seem to be looking for undervalued assets,” Ladam said. “My first reaction is that this is going to be good hunting grounds more for that kind of firm.”

But, for now, the market – and all of the U.S., really – is waiting to see how Congress votes on an altered rescue bill. On Oct. 1, media outlets were saying a vote could happen as soon as that evening.

Share this article: Email, Slashdot, Digg, Del.icio.us, Yahoo!MyWeb, Windows Live Favorites, Furl
Add this article feed to: RSS, My Yahoo, Newsgator, Bloglines

Read Comments [1]