In the past two weeks, we have seen two small Canadian telecom equipment manufacturers, BTI Systems and TeraXion be sold off in whole or in part. BTI is going to Juniper (see Sale of BTI). Assets from TeraXion going to Ciena (see TeraXion assets sold). Do small players like BTI Systems and TeraXion have a chance on their own? Maybe not. In today’s telecom equipment world, engineering and development represents such staggering sunk cost that it squeezes profitabilty for the smaller players.
Even larger players are not having an easy time. Ciena is not finding the going easy (see Ciena results). Alcatel-Lucent had to be sold to Nokia in the hope of finding a solution (Nokia buys Alca-Lu).
Is anyone really making money in our industry? Well Huawei expects to report full year revenues of 390 billion yuan renminbi (US$60.1 billion), an incredible year-on-year increase of more than 35%. Although official numbers have not been released, acting CEO Guo Ping made the announcement to Huawei employees in a year-end letter (Huawei letter).
Does Huawei enjoy a competitive advantage through their ability to distribute engineering and development investment over larger sales? It does help, but I am not sure that is enough. Although I imagine that Nokia/Alcatel-Lucent hopes size will give them a boost.