Smartphones could hurt bottom line, analysts say

Cord-cutting will take place not just in voice but also in broadband substitution, facilitated by mobile operators. Ultimately, significant numbers will either use mobile for their first broadband experience or, in more developed markets, permanently cut the broadband cords in exchange for wireless. Purely mobile service providers and wireless infrastructure vendors will be the clear winners here. Lonergan suggested those that aren’t positioned to compete with mobile broadband – the potential losers – should focus on value and customer acquisition, not the upsell, to stay competitive next year.

“Landline players must drive prices even lower and achieve short-term stickiness through financial incentives to encourage consumers to not cancel their broadband connections,” he said.

For the enterprise space, Kerravala predicted that next year will see wired switch port sales decline for the first time in history. The difference between wireless and wired technologies is already negligible to the end user, so good network design might not require a wired network augmentation, he said. As the enterprise moves away from traditional desktop fleet management, Kerrvala also predicted that desktop virtualization will replace PC replacement in 2009. The change comes as the industry is on the precipice of finally having business-to-business video. As companies look to cut costs, telepresence is just now becoming a real means of reducing travel and saving money, he said.

“The whole experience around video has changed,” Kerravala said. “The trend of unified communications, a broader subset of communication, and how to apply that to certain processes acts as a driver for this as well. Before, the systems didn’t do a good enough job of replacing the in-person experience, and they do today. For that reason, you’ll continue to see the growth of video happen.”

On the supply side, two of the eight global network equipment manufacturers will be forced out of one or more major markets, Vellody added. As a result of consolidation through joint ventures and acquisitions, changes in management styles and structures, the equipment market has suffered and vendors have continued to lose revenue. Companies that have publically struggled and reduced their outlooks include Alcatel-Lucent, Nortel Networks, Motorola and Nokia Siemens Networks, while others like Cisco, with a clear channel strategy, Ericsson, with its focus on 4G, and Hauwei Technologies, which continues to push into new markets, will continue to thrive.

“In all bad times, necessity forces adaptation,” Kerravala concluded. “Those companies that are willing to look for transformational technologies – look for new ways to do things – will weather it. Those who don’t focus on innovation will be in a weak position. 2009, as gloomy as it may seem, will drive rapid changes that will stay with us for the rest of our careers and change the way we do work.”