Friday, October 26, 2012

Service Providers Clearly are Cutting Spending

What seems like an endless wave of job cuts in the telecom equipment supplier industry has been going on for more than a year, separate from the background shrinkage that has been going on for more than a decade.

Among the latest is Ericsson, the largest global supplier of mobile network infrastructure, according to Bloomberg.

Ericsson AB reported a 43 percent decline in third-quarter profit as wireless operators curbed spending in a sputtering economy.

Net income fell to 2.18 billion kronor ($324 million) from 3.82 billion kronor, Stockholm-based Ericsson said today. Gross margin, or the percentage of sales remaining after production costs, slid to 30.4 percent from 35 percent, missing the 32.2 percent average of analysts’ estimates.

The clear evidence of investment in Long Term Evolution notwithstanding, it is clear enough that other projects are being postponed. Telecom capex fell in the wake of the Great Recession of 2008, as would be expected. Spending picked up by 2010, but it now appears more stringency has returned. 

The problems arguably are centered in the European markets.

Severe competition between smart phone and tablet makers will intensify in the period leading up to the Christmas and holiday season, likely signaling a tougher earnings climate.

Apple, Samsung and HTC gave cautious guidance on their fourth quarter prospects. Major new device launches and the impact of a slowing global economy are seen as issues. 

Total worldwide handset shipments reached 410 million units in the third quarter of  2012,  Strategy Analytics says.Overall global shipments of mobile handsets were virtually flat in the second quarter, rising only one percent to 362 million units, according to Strategy Analytics.

But some might note that smart phone sales in some markets, such as the United States, have been slowing for years

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