Last week's global stock market performance for once justified the 'roller-coaster' metaphor often used to describe its gyrations. Mid-week it went through the floor at roughly 5 per cent per day, but at the end of the week up came the global market again (on good news from the US), making up nearly all its losses.
However at least one passenger was absent from the ascending carriage - Nortel Networks. The Canadian equipment vendor went down from an already fairly 'down' position and stayed down.
With its share price at one point at just $2.68 (after a consolidation) it is now worth just over one tenth of its annual sales. Most companies are usually valued at from one to 3 times (or even more) their revenues - investors have to believe they're sick and getting sicker to let the valuations sink below that, but that unfortunately, is what Nortel appears to be.
There have probably been mistakes made by senior management and lessons to learn from Nortel's dire performance. But the performance also points to the fact that the market for telecom equipment has changed so much that the old equipment behemoths just can't work properly within it any more.
In the 1990s the world's rapidly expanding and heavily-investing telcos looked to 'big iron' providers of network infrastructure to provide comforting complete solutions, whether in mobile or fixed infrastructure.
Big was beautiful because it promised hand-holding, security and global reach for the customer. So companies such as Nortel, Lucent and Alcatel expanded and bought their way into new technologies. It all seemed to go extremely well.
The party ended in 2001 when the carrier spending stopped and the big vendors - especially Nortel - started shedding staff and trimming their ambitions. Ever since, the telecom market has been progressively turning away from the big and bold to the cheap and specialised.
It's partly to do with the technology. On both fixed and mobile sides increasingly commoditised hardware and strong standards have tended to favour the incoming specialist.
Then there has been cut-throat competition around the by now well-understood and mature technologies such as IP network gear and 2G mobile network infrastructure.
Chinese vendor Huawei in particular has taken its markets by storm, radically undercutting existing players and giving carriers what they want and need - ever-cheaper network infrastructure.
That enables them to compete on price amongst each other for the new lines of business now fuelling the global telecom market - mobile telephony in developing markets and broadband access just about everywhere else.
Both are fast-growing, huge markets; both rely on every-diminishing costs and therefore ever-lowering pricing to continue to drive growth.
As a result Huawei and others have both crashed prices and taken share.
According to a recent advisory from ABI research, Huawei had captured almost 8 per cent of the global mobile infrastructure market and now occupies fourth place behind Ericsson, Nokia Siemens and Alcatel. Alcatel (another company suffering from an identity problem) has a share of just over 13 per cent and will likely be caught and passed by Huawei very soon.
Huawei has all the cards. It is resident in the biggest growing market in the world, China, where the network operators plan to spend close to $80 billion on network infrastructure over the next three years. A chunk of that spend will be heading Huawei's way.
Meanwhile, the North American market, which used to be such a lucrative one for Nortel and Alcatel-Lucent is winding down. According to ABI Alcatel-Lucent "suffered one of its worst quarters since its merger.
During the first half of 2008, the company’s wireless infrastructure shipments decreased 63 percent, it says, compared to the second half of 2007. Two of its top customers in North America – Sprint and Verizon Wireless – completed EV-DO Rev A deployments, which led to decreased CDMA spending. Sprint alone reduced CAPEX by $1 billion compared to 2Q 2007.
ABI reckons Huawei could be the lead vendor within five years.
The solution? There isn't one really. According to recent reports Nortel's leadership is looking to slim down and exit areas where it can't be certain of holding a strong position - in a specialist world being 5th in a market of 10 competitors is nowhere.
So Nortel has to get itself into several specialist areas and then partner for the rest if it's even to partly revive those flagging fortunes.
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