Nortel Falls To Telecom's Tectonic Shift

[qi:gigaom_icon_4G] Earlier this month, when I wrote about Telecom’s Titanic Shifts and the decline of the once mighty service providers, in passing I noted the slow-mo descent of Western equipment makers. With the mega-growth registered by non-Western carriers as dominant equipment buyers, we have seen the rise of two hardware giants: Huawei and ZTE.

Their rising fortunes have been mirrored by sharp declines for hardware makers based in Europe and North America. That point was brought home over the weekend when Nortel announced that it was selling CDMA and LTE pieces of its wireless equipment business to Nokia Siemens Networks (NSN) for about $650 million. It was a tactical admission by the once-mighty Nortel that it had little or no room in tomorrow’s telecom world.

I have followed Nortel for a long time. The company rose and fell with the telecom bubble. It got Cisco envy — it bought companies for outrageous prices only to see the deals go nowhere. The hubris of its managers turned this once proud house of innovation into a footnote. The company started to chase new markets too late and relied too much on North American market for too long. A lot of that can be blamed on lack of management.

How long before we see other big names in telecom take a dirt nap? Will Alcatel-Lucent be next? In a note to its clients, UBS Research points out that Alcatel-Lucent is going to face considerable pressure in North America, as NSN will indeed be super aggressive. Given how aggressive Huawei has been in its bid to gain market share, the jury is still out even on NSN’s long-term sustainability.

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