What safety nets do wireless manufacturers have in place in case we stumble into a true recession?
The question has come up often lately because of the billions of dollars already invested in building network infrastructure in preparation for the kick-off of multimedia offerings in a third-generation environment.
Most vendors seem conscious of the economic initiatives, costs and sacrifices required to tide over any hiccups on the way.
Although most vendors continue to invest in 3G, the principal attitude seems to be to cut costs in terms of staff layoffs, outsourcing and plant closures as well as counting on the relatively low expense of cdma2000 networks.
“Their principal approach is lay-offs and other cost-cutting measures,” said Cynthia Hswe, senior analyst for the Strategis Group. She said the vendors are committed to 3G technology and cannot roll back at this stage.
“They know that they have to permeate the market with handsets, too,” she said.
Layoffs have been a principal motif with most vendors. Last week, Alcatel announced job cuts of about 1,100 from its U.S. operations, including 800 full-time positions. The company, which employs 130,000 workers worldwide, said the job cuts represent about 5 percent of its work force in the United States.
A tardy economy and a slump in its handsets division, which reported a first-quarter loss, prompted the decision. The company has not ruled out further job cuts, a signal that the strategy remains viable if the company bumps into bad times.
Lucent Technologies Inc., which has been riding various storms in the past year from revised expectations and accounting errors to technology miscues in its network optical units, also has addressed its adversity with layoffs. The company announced in January it would sponge off 10,000 jobs through layoffs and attrition. Last week, the company announced it would lay off an additional 1,000 staff, foreshadowing a recession policy.
Lucent, however, relies on its technological strengths and safeguards for survival.
Bill Clifford, Lucent’s vice president for radio access development, identified his company’s strategy as rolling out “products with low initial cost and the ability to grow.”
The products include OneBTS base station platform which supports wireless air interfaces and migration paths to 2.5G and 3G with smart antennas to ensure improved coverage, double capacity and overall data rate.
He said its mobile Internet products like Lucent MiLife Mobile Internet Gateway and Lucent MiLife Media Platform will enhance a variety of applications and create increases in terms of average revenue per user.
Nokia also has shut down a plant in Irving, Texas, and has laid off hundreds of staff. Two weeks ago, it sliced off about 400 employees in its network units. The company said it was part of its design to strengthen its production bases in Mexico and Asia.
Nokia chairman and chief executive officer Jorma Ollila said the company aims to attack future economic upheavals with products and solutions.
“In the coming 18 months, we are planning to launch several truly epoch-making products and solutions that will change the concept of mobile services and the Internet,” he said.
Naveen Dhar, vice president of marketing and business development for mDiversity, says much of the performance of the vendors in a recession will depend on the operators.
“They do need to deliver enhanced features and services for the end users,” he said, “and one key thing is upgrading operating systems for GPRS and EDGE.”
He said these enhancements will be less expensive and so the companies may not buckle severely in a recession.
“Because the operators are looking for innovative ways for existing and new services, that drives OEMs to provide services and solutions that keep on working with existing infrastructure,” he said.
Lucent’s Clifford, however, contends that such upgrades will work only for cdma2000 technologies, and not wideband CDMA, which requires the installation of a new set of base station and hardware.
