Technology Business Research Ranks Nokia No. 1 in 1Q02 Benchmark Results; Stabilizing Business Models Amidst Declining Markets is Top Priority.

Business/Technology Editors

Ranked No. 1 and No. 2 by Technology Business Research's (www.tbri.com) network infrastructure vendor competitive benchmark, Nokia and Cisco have strong business models that are carrying the companies through the tumultuous downturn in the telecom market. Cisco's dominant position and profitable product lines in the enterprise market continue to carry the company through the downturn while it prepares to penetrate the service provider market. Meanwhile, Nokia overestimated demand for wireless equipment and mobile phones in 2002, but the company is maintaining overall profitability through its strong mobile phone business, which still represents a dominant share of its revenue base. Lucent jumped to No. 3 this quarter from No. 6 last quarter due to improvements in its business model. The company is making progress in its internal initiatives, but its customers continue to cut spending. Lucent is showing it is on top of what the company can control, mainly costs and expenses, while waiting for the recovery of the telecom market. Ericsson dropped to No. 4 this quarter from No. 3 last quarter due to weaker business model results. The company's revenue base has shrunk faster than it has been able to reduce fixed costs. Ericsson is trying to find the balance of maintaining its technological leadership through continued R&D investments while improving investor confidence through improved profitability.

Motorola's benchmark results were about the same as last quarter, but the company dropped to No. 5 this quarter from No. 4 last quarter as a result of Lucent's improved results. Like its competitors, Motorola continues to strengthen its balance sheet through asset disposition, business realignment and headcount reductions. Alcatel, Nortel and Marconi all stayed in the same positions as last quarter. Although Alcatel is showing improving sequential results, the company is faced with the challenging objectives of cutting back to become profitable in the short term while maintaining its long-term expansion goals. Nortel is still recovering from a dramatic decline in its revenue base, so it will be one or more quarters of weak results before the company can show the benefits of its massive restructuring and refocusing of its core businesses. Lastly, Marconi is looking to survive through a recapitalization of its debt with equity swaps that will lead to dilution of its stock value. The company was recently delisted from the NASDAQ due to noncompliance with minimum stock price requirements.

       NBQ Infrastructure Vendors 1Q02 Benchmark and Metrics(1)
                             Nokia      Cisco     Lucent    Ericsson
NBQ Benchmark
NBQ Ranking                    1          2          3          4
NBQ Score                    7.22       6.03       5.00       4.89
Business Model
Year-to-Year
 Revenue Growth             -12.4%       2.0%     -40.5%     -33.9%
Operating Margin             17.6%      18.1%     -15.3%      -9.0%
Revenue per Employee       $501,219   $511,590   $322,661   $259,563

                           Motorola    Alcatel     Nortel     Marconi
NBQ Benchmark
NBQ Ranking                    5          6           7          8
NBQ Score                    4.78       4.26        4.18       3.85
Business Model
Year-to-Year
 Revenue Growth             -21.6%      -26.7%     -49.4%     -34.0%
Operating Margin             -5.9%      -10.6%     -38.5%     -16.0%
Revenue per Employee       $264,252    $224,445   $312,170   $103,229

(1) Partial metrics used in NBQ benchmark methodology.

The telecom world is bouncing around the bottom of the market while preparing to rise from the ashes as a new kind of industry that has been changed by IP technology and the Internet boom years of 1999 and 2000. The network and communications equipment industry continues to be faced with irrational underspending by service providers faced with decreased competition and consolidation, an uncertain regulatory environment and a closed capital market. Irrational underspending by service providers will last another year, which will likely be followed by renaissance of technological innovation in 2004 and 2005 by the "new" telecom industry. "After a dramatic boom and bust cycle, the telecom industry is positioned to be born again with a blend of the excitement of the visionary Internet boom years of 1999 and 2000 melded with the pragmatism of profitable business models dictated in the bust years," stated Bill Lesieur, director of TBR's Network Business Quarterly. "New leaders will emerge from the ashes of the telecom industry meltdown, while many others companies will perish in their fear and paralysis."

About TBR:

TBR is a leading industry advisory firm providing comprehensive analysis of high-tech firms from a combined business, financial and technical perspective. Financial results and business models serve as the basis of TBR's analysis of vendors' progress each quarter in meeting their strategic and functional objectives (product, marketing mix and manufacturing/supply chain). In each quarterly report, TBR tracks changes to the vendors' internal strengths and weaknesses, along with external factors impacting market opportunities and competitive threats. TBR publishes a five-page "Initial Response" report within 24 to 48 hours of financial results, followed by a 20- to 25-page report later in the quarter.

TBR's Network Business Quarterly service provides coverage of the major players in the networking, communications and Internet infrastructure markets, including Ericsson (Nasdaq: ERICY), Nokia (Nasdaq: NOK), Motorola (NYSE: MOT), Nortel (NYSE: NT), Lucent (Nasdaq: LU), Alcatel (NYSE: ALA), Cisco (Nasdaq: CSCO), Marconi (LSE: MONI), 3Com (NASDAQ: COMS) and Enterasys (NYSE: ETS). TBR's NBQ service also provides coverage of mobile operators, including Verizon Wireless (Verizon Communications (NYSE: VZ) and Vodafone (NYSE: VOD) joint venture), Cingular Wireless (BellSouth (NYSE: BLS) and SBC Communications (NYSE: SBC) joint venture), VoiceStream, AT&T Wireless (NYSE: AWE), Sprint PCS (NYSE: PCS) and Nextel (NASDAQ: NXTL).

Complete reports are available to accredited journalists.

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