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Article

Title: MAJOR VENDORS RESISTING URGE TO MERGE

Author: Gubbins, Ed Article Type: Product Analysis
Source: Telephony, v246 n15 p6(2) Publication Date: Aug 15, 2005
  ISSN: 0040-2656
  Illustrations: Graphs, Charts
URL of Publication: http://www.internettelephony.com

While many pundits say the big telecom companies are merging with other big companies, 2005 has not been the year for this large-scale consolidation. Telecom equipment margins continue to plummet from the upper 40s to the 20s, especially as Chinese manufacturers sharply lower prices. Additionally, the growth rate for equipment manufacturers is expected to go from 8% to 4% in 2006. There are several reasons megamergers dont work so well. For one, entrenched corporate cultures are difficult to meld, and some of the larger telecom companies are in foreign countries that dont take kindly to a U.S. takeover. Just because carriers merge doesnt mean that the existing contracts with manufacturers wont be upheld or that they wont work with several vendors. The number of carriers is not the wheel that drives the market, but the amount of traffic over the network is, as the equipment needs are essentially the same. To increase revenues, vendors should focus more on product lines that bring in the most business and getting rid of the ones that dont perform. Many of the companies will depend upon partners to fill in any gaps in their product portfolio. While large telecoms are still buying smaller vendors, the promise of large megamergers is not strong enough to get them in the acquisition game.

Special Features: Graphs, Charts

Products:
Telephone Companies

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