Gartner Dataquest Says Top Eight Telecom Equipment Manufacturers Experienced a Shift of Power in 2000.

Business Editors

SAN JOSE, Calif.--(BUSINESS WIRE)--Feb. 28, 2001

The top eight telecommunications equipment manufacturers in 2000 remained the same as in 1999, but increasingly diverging strategies resulted in a shifting of the rankings, according to Dataquest Inc., a unit of Gartner, Inc. (NYSE: IT and ITB). While nearly all of the top-tier vendors experienced double-digit growth in 2000, they will face increased challenges in 2001.

"Whether there is an actual recession or not, there will be a paring back in 2001," said Dean Eyers, group vice president for Gartner Dataquest's worldwide Telecommunications and Networking group. "We expect slowing demand for services; reduced and delayed investments in networks and applications; patching rather than overhauling or replacement of enterprise networks; and the disappearance of some customers."

Ericsson moved into the No. 1 position (see Table 1), after four years as the No. 2 vendor, based largely on its strength in mobile networks during a year of significant investment in third-generation (3G) systems. Nortel moved from the No. 3 position in 1999 to the No. 2 position in 2000. Gartner Dataquest analysts said Nortel had a great balance of leading edge technology skills and executed well in the high-growth optical market.

Table 1

Top Eight Worldwide Telecommunications Equipment Manufacturers'
Estimates for 2000 (Billions of Dollars)

                2000      1999         Growth (%)    Local Currency
Company        Revenue   Revenue   Based on Revenue  Revenue Growth (%)
----------    ---------  --------  ----------------  ------------------
Ericsson        31.3       25.7         21.5              34.9
Nortel          30.3       21.3         42.2              42.2
Nokia           27.2       20.1         35.4              57.0
Lucent*         25.8       33.8        -23.5             -23.5
Cisco           23.9       15.0         59.3              59.3
Siemens**       22.8       20.0         14.5              32.5
Motorola        22.8       19.7         15.3              15.3
Alcatel***      21.6       17.1         26.6              46.8

Top 8 Total    205.7      172.7         19.1                 -

*   Lucent 2000 figures exclude Avaya; combined figure would be $33.2
    billion.
**  Siemens 1999 figure re-estimated because of exchange rate updates.
*** Alcatel 1999 figure re-established to exclude components business.

Source: Gartner Dataquest (February 2001)

Nokia had strong growth based on its mobile terminal business in 2000, but Gartner Dataquest analysts said growth is likely to soften over the next few years. A major reason for Lucent's slide from the No. 1 to the No. 4 spot was the spinning off of Avaya, although it still had a difficult year. Cisco had the strongest growth among the top eight vendors, but Gartner Dataquest analysts warn that growth for the company will not continue at the same rate in its core businesses. The company will need to modify its strategy if it is to continue its strong growth rates.

Motorola benefited from its mobile legacy in 2000, but it is losing share in key competitive markets. It has positions in cable infrastructure and low-end data products, but it will be difficult to see its breakout strategy as the mobile segment softens. For Alcatel, DSL has been a major weapon, but recently announced core routing and optical products will help. Siemens slipped from the No. 5 spot in 1999 to the No. 6 position in 2000. Siemens went through a major restructuring intended to sharpen its focus on its operator and mobile businesses.

Whether there is an actual recession or not this year, the slowing economy and the recent struggles in the dot-com industry will make 2001 a turbulent year in the telecommunications industry.

"To keep moving through the doldrums, telecom manufacturers need to focus on execution of a clear strategy, target the needs of the important customers and understand that this is a long-term business -- help your customer through the tough times, and you'll both be there on the other side," Mr. Eyers said. "Do not assume your customer wants to be left alone, but rather talk to them regularly. While overall spending levels will reduce, some budgets are 'use it or lose it,' demanding that telecom manufacturers accelerate the sales cycle in both their interests and their customers' interest."

This research is published by Gartner Dataquest's worldwide Telecommunications and Networking group. This group provides analysis for the full spectrum of telecom and networking issues. To keep up to date on the latest telecommunications issues, please visit Gartner's Telecom Marketplace Resource Center at www.gartner.com. To purchase reports or subscribe to Gartner Dataquest programs, please call 800-419-DATA, or 408-468-8009.

Gartner Dataquest is the recognized leader in providing the high-technology and financial communities with market intelligence for the semiconductor, computer systems and peripherals, communications, document management, software, and services sectors of the global information technology industry.

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