Worst may be over, Lucent CEO says
- 12 March, 2003 07:55
After watching the bottom fall out of the global telecommunication equipment market in 2001 and 2002, Lucent Technologies Inc. feels like it's standing on more solid ground these days. But the company's chief executive warned there are few signs that a full recovery is on the way.
"Last year, capex (capital expenditure) spending declined 48 percent," said Patricia Russo, Lucent's chairman and CEO (chief executive officer), referring to fixed-line capital spending in North America. "When you are experiencing declines at that level in those timeframes, that's pretty dramatic."
As dramatic as the impact of those declines has been on Lucent, which does two-thirds of its business in North America, Russo says the rate of decline has slowed and this may hint that the worst is over for telecommunication equipment makers.
"You get to a point where service providers must spend on maintaining their networks," Russo said, adding that relatively strong demand in China and India has also helped shore up business.
However, that doesn't mean that a full recovery is in the works for equipment vendors. Russo expects to see fixed-line capex in North America drop by a further 10 percent to 15 percent during 2003 and noted that some analysts have predicted that some sort of recovery may take place in 2004. However, Russo stopped short of backing those predictions.
"You begin to feel that things are stabilizing but not yet recovering," Russo said. "That's why I've been reluctant, and everybody's been reluctant, to call a bottom to the industry yet."
Adding to the uncertainty are ongoing economic and geopolitical issues that threaten to postpone any recovery in service provider spending on new telecommunication equipment, she said. "There's just a lot of overhang right now," she said.
While the market may face a significant amount of uncertainty over the next twelve months or so, Russo is confident that better times lie ahead for equipment makers. "We believe the market for telecommunication equipment will ultimately recover," she said.