Intelec: Power sector down but not out

MONTREAL - Despite depressed sales and tighter carrier capex budgets, the power sector has put on a brave face for this week’s Intelec’s annual International Telecommunications Energy Conference in Montreal, Quebec.

Though virtually every power vendor has reported lowered equipment sales in 2002, many of them also claimed they have adjusted their market strategies to stay in line with current carrier realities.

“There’s been a significant change in the way everyone does business,” said Paul O’Rourke, business development manager of APC’s access networks group.

For example, the price of power equipment has suddenly become an extremely important factor for carriers--and now, by extension, for power manufacturers. For that reason, many vendors have been touting smaller, more powerful products at lower price points.

One example is APC’s PowerStruXure power system architecture for use in data centers. “All of this is focused on how to make this economically more palatable [for service providers],” O’Rourke said.

Another way in which power vendors are refocusing their efforts is on outsourced power systems support. As carriers cut back on budgets and staff, they no longer have the in-house expertise to perform ongoing power equipment maintenance, and an increasing number of carriers have expressed interest in outsourcing such services, said Jim Hall, manager of service marketing for Liebert.

Emerson’s Liebert division focuses on what Hall calls “life cycle service.” This includes not only the initial installation of power equipment, but the ongoing monitoring and maintenance. “Carriers want to separate the core and non-core sides of their businesses,” Hall said.

Liebert goes even so far as to maintain power equipment built by other vendors. “We’ll service it regardless of who manufactured it,” said Philip Ciatto, west area service sales manager for Liebert.

Despite these and other tactics that vendors are using to offset a slumping sales market, many said it’s inevitable that the sector will see further consolidation, and some predicted that not every face present at this year’s Intelec show--especially the smaller players--will be around next year.

Meanwhile, some of the largest players in the power market simply want out. Just as Lucent Technologies sold its Power Systems division to Tyco less than two years ago, Marconi Communications is now shopping around for a buyer for its power equipment group, which includes Reltec and its well-known Lorain brand.

Indeed, as O’Rourke pointed out, the power equipment market is sometimes its own worst enemy. Carriers have consistently challenged manufacturers to build extremely reliable, extremely robust products, and they have succeeded almost too well: Now most carriers are less inclined to completely replace their power equipment because they simply have no need, O’Rourke said.

But even if only 5% of the network power equipment is replaced each year, that still represents a multibillion-dollar selling opportunity, according to Barry Papermaster, vice president of sales and marketing for Emerson Energy Systems. “So much of this business is replacement,” said Papermaster, who compared power equipment vendors to tire manufacturers. “So much of the industry is driving on old tires.”

There is a light at the end of the tunnel, according to John Celentano, president of Skyline Marketing Group and one of three panelists who presented at Monday’s opening session. Celentano admitted that power has followed the slump in capex spending, led by the RBOCs and large long-distance players. “Power is obviously a follow-on technology,” he said, adding that Skyline estimates the global power market will sink to $4 billion in 2002, compared with $5.5 billion at its peak in 2000.

But Celentano also predicted that the power sector would begin to pick up again starting in 2003. In the meantime, he advised power vendors to keep focusing on helping carriers meet their reduced capex budgets. “If you can help them be successful, you will be successful,” he said.