Mobile infrastructure revenue dropped 14 percent in the first quarter of 2003 to $6.4 billion compared with the fourth quarter of 2002, according to a report by the Dell’Oro Group. Credit Suisse First Boston has a further gloomy take, predicting a 20-percent decline in 2003 and a further drop of 5 percent between 2003 and 2006.
“While seasonal weakness was expected in the first quarter, the quarter came in slightly below our expectations,” said Greg Collins, director of Dell’Oro Group. “We have similar expectations for the full year 2003, amid reduced capital spending and persistent economic weakness.”
Apart from seasonality, the Dell’Oro report cites price declines and capital spending reductions as reasons for the decline. Infrastructure vendors have suffered during the past couple of years from continued unwillingness of carriers to increase spending on gear, in spite of increased minutes of use and subscriber growth.
The CSFB note highlighted positive spending patterns in the United States and China in the March quarter, but incremental weakness in Europe, in spite of some third-generation spending.
“Korea and Japan, although relatively closed to foreign vendors, have reigned in capex for ’03 on 3G pushouts and finishing initial network buildouts in Japan,” wrote Tim Long, wireless equipment analyst at CSFB.
The Dell’Oro Group report notes that uptake in CDMA revenue in Asia did not offset weakness in North America. TDMA technology also enjoyed growth in the Americas during the quarter.
Analysts think the slow increase in W-CDMA services accounts for much of the conservative spending by service providers.
Long observed that some companies experienced some growth. Lucent Technologies Inc. grew 25 percent sequentially from sales to India, China and Verizon Wireless. Business in China and to Nextel Communications Inc. also boosted Motorola’s balance sheets, according to CSFB.
“However, we do not believe quarterly market share shifts in the infrastructure market are as meaningful as in the handset segment,” commented Long.
Long describes UTStarcom Inc. as the “only company growing infrastructure revenues,” adding that the firm expects Motorola to see deeper-than-average industry declines over “the next few years due to share losses and broader exposure to the China cellular market.” SARS has affected Motorola and other businesses during the past month and may figure into its performance in the next quarter.
Long identified L.M. Ericsson, which leads the global mobile equipment arena in market share, as having the “highest exposure to the wireless infrastructure market.”
