Vendors expanding or refining portfolios to survive telco spending drop

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With telecoms operators spending less, vendors are pursuing one of two strategies to weather the impact: expand the portfolio and enter new growth areas, or – for those vendors struggling financially – refine the portfolio and focus on profit optimization.

That’s according to Technology Business Research’s 1Q17 Telecom Infrastructure Services Benchmark, which says that vendors are increasingly diversifying their customer bases and portfolios to limit the fallout from lower telecom operator spend.

“Spend in the cloud service provider and cable customer segments remains robust, while opportunities in the application layer remain attractive across all customer types,” explains TBR Telecom Senior Analyst Chris Antlitz. “Nokia and Juniper are standout outperformers in diversification. Though Nokia’s results have yet to show it, the company is building a strong base of contracts with a diverse range of customers, which should begin to bring organic revenue growth over the next year. Meanwhile, Juniper’s Contrail solution and switching infrastructure for cloud environments remain in strong demand across all customer types.”

TBR adds Huawei is not immune to the challenges facing the telecom industry, and its growth is expected to slow in 2017.

Huawei has been able to stave off the issues facing the ICT ecosystem, such as how to navigate the technology disruption caused by the shift to software-mediated (NFV, SDN) networks and cloud as well as how to transform operations and business models to align with new market demands, but it will not be able to completely avoid them. With CSP capex spend in China expected to decrease over 13% year-to-year in 2017 (according to publicly reported guidance from the Big Three operators in the country) and a declining CSP spend environment in international markets, TBR anticipates Huawei will find itself at a crossroads in 2017. Growth will likely slow substantially compared to prior years and margins will come under further pressure, which could prompt Huawei to make difficult decisions, including undertaking a restructuring initiative to protect and extend its market leadership.

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