Ovum sees glimmers of hope for vendors

Despite a rough fourth quarter for telecom equipment vendors, “glimmers of hope” remain for the challenging year ahead, according to research analysis firm Ovum.

Ovum determined that revenue figures pointed to two pieces of good news for the group: Collectively, they have more cash and liquid assets than debt (although Nokia's debt level shot up last year, most vendors reduced their debt), and the gap between that cash-plus-liquid-assets mix and monthly operating expenditures increased slightly, even in that brutal fourth quarter. “Cost-cutting efforts are starting to take effect,” Ovum concluded.

Ciena and Tellabs in particular struggled with falling top lines in the fourth quarter, punished for their broad exposure to the North American market, which vendors widely fingered as the epicenter of the damage. Juniper Networks, hedged between enterprise and carrier segments as well as geographies, enjoyed healthy margins of 14%. And Cisco, while projecting a steep sales drop in early 2009, could use its nearly $30 billion in cash and liquid assets to buy rivals weakened by the market. “Motorola's position is likely the worst,” Ovum said, pointing to the vendor's 26% revenue drop in the quarter and its operating margin of negative 24%.

But the group of vendors Ovum focused on didn't include Nortel Networks, now in a bankruptcy that has been extended to May, or much smaller Adtran, which — despite a 5% revenue decline in the fourth quarter — said it saw an uptick in order activity in the new year.