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Wireless Hit by Economic Worries
After a few quarters of nonchalant statements that the sub-prime mortgage crisis and rising oil prices weren’t going to affect the tech stocks, the bloom is off the rose. The lowered sales forecasts and lackluster quarters are trickling in, and the trend for wireless companies is clear. This morning, networking equipment maker Ciena said in its earnings release that it expected lowered sales for the coming quarter. Gary Smith, Ciena president and CEO said:
“In addition to existing customer-specific challenges, we have recently begun to experience order delays from many of our Tier One service provider customers, which we attribute to their guarded approach to capital expenditures given the uncertain macroeconomic environment. While we’ve seen no project or order cancellations, sales cycles are lengthening and some deployments are slowing.”
Yesterday Qualcomm sent lower the shares of fellow chip maker Texas Instruments, as well as those of handset maker Nokia, after Qualcomm CEO Paul Jacobs said the replacement cycle for cell phones in developed countries was lengthening. If phone sales drop, chipmakers, handset makers from Motorola to Samsung, and carriers will lose. Worries from the carriers will also affect Ciena’s competitors, among them Cisco, Alcatel-Lucent and the troubled Nortel, which has been trading below its cash value intermittently throughout the last month.
Preparations for a downturn began earlier this year at Cisco, but it still reported record-breaking sales for its second quarter earlier this month, and CEO John Chambers said any economic downturn would be short lived. However, it did lower its revenue forecasts slightly for the second half of the year. With consumers tightening their belts, an industry that has grown to rely more heavily on the Average Jane and Joe forking over money for the latest gadget might find themselves doing a little belt-tightening of its own.
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Dell Thinks Small Biz is Big Biz for VoIP
Dell begins bundling Fonality’s open-source software with its enterprise servers today, its latest gambit to compete in the already-crowded VoIP market — this time targeting companies with 125 employees or fewer.
This is fertile ground: Analyst Alan Weckel of research firm Dell ‘Oro Group estimates annual PBX revenues, including those from VoIP phone systems, will exceed $7.5 billion by 2011. Much of this growth could come from small- to medium-sized businesses. Weckel told The Wall Street Journal in August that he thinks 35 million small businesses will adopt IP phone service before 2010 (about 11 million currently use it), a number that’s likely to ramp up if the economic situation worsens.
Granted, this is a market that has never fulfilled its promise. Few of the many hosted-PBX service providers are even making money. Yet Dell (DELL) still sees opportunity in hawking VoIP to businesses. Why? They buy more gear than cost-conscious housewives. If there is one thing Dell knows, it is that empires can be built on the incremental profits inside lots of gray boxes and the software that runs on them.
Dell is a relatively late entrant here. Cisco, Avaya, Nortel and Alcatel-Lucent, to name a few, are established players in the VoIP space, though their products also target larger customers. In the small business space, Digium and Microsoft, which released its Microsoft Office Communication Server in 2007, will be the chief competitors. (Microsoft has claimed a working relationship with Dell in the past.)
Late or not, Dell lives to put the squeeze on the margins of its peers. The Fonality VoIP Phone System will be priced at about $750 per employee for a five-employee system, or $9,999 for a system that will serve 25. This is far less than Cisco-class proprietary system, which can cost as much as $2,000 per employee. Being open source, Dell-Fonality boxes are simpler than most too, and capable of self-installation — an additional savings worth thousands of dollars.
“The big five phone systems-vendors are going to wake up today and see Dell as a competitor and it’s going to be a watershed event — the end of the phone system-oligolopy,” Fonality founder Chris Lyman said.
It certainly is a watershed event for four-year-old Fonality (as Lyman tells Found|READ), which has been selling its own branded VoIP boxes since 2003. Fonality now has 5,000 business customers (and 130 employees). It could sure use Dell’s sales channel to scale. Dell has between 6 million and 7 million small business customers, according to IDC.
Fonality will get a standard revenue share: hardware proceeds go to Dell, software revenues flow to Fonality (Dell won’t disclose the exact breakdown). Users will get their bill from Dell. Tech support will be handled by Fonality for at least the first year, Lyman says. Dell’s service is available for purchase today, via phone. Customers can order systems at Dell.com by February.
Microsoft dials up phone ambitions - CNET News.com
Microsoft’s (Beta!) VoIP Device Blitz
You can’t buy them yet, but if you are an enterprise IT exec who is kicking the tires on IP telephony offerings you might at least want to take a gander at the wide range of Microsoft-centric IP voice devices — phones, headsets, videocam monitors — being informally unveiled Monday at the Windows Hardware Engineering conference in Los Angeles.
All meant to work with the still-in-beta Office Communications Server software from Redmond, the VoIP device blitz from nine different vendors is Microsoft’s latest attempt to break into the corporate Voice over IP market, against established players like Avaya and Cisco.
While the devices — shown last week in pre-WinHEC press briefings in San Francisco — performed impressively in an all-Microsoft environment, many big questions remain, such as:
1) OCS still isn’t available, nor is pricing information;
2) Much of the functionality shown is already available from competitors; and
3) do you really want to trust your phone system to Microsoft software?
Despite our traditional skepticism of Microsoft’s commitment to communications, we should start out here by saying that the demo of phone systems cobbled together in a SF hotel basement last week all performed as planned, without any of the also traditional Microsoft demo glitches. VoIP phones rang crisp and clear, triggering on-screen synergy with Office Communicator, updating presence-based information for other Microsoft-based clients, etc., etc.
Impressive as it was for a Microsoft VoIP display, there wasn’t anything shown — customizable presence info, IM-to-voice-to-video call escalation — that isn’t already available from other IP players or even free offerings like Skype or Gizmo. So what’s the fuss?
For starters, the participation of tested device players — like Polycom, Plantronics, Samsung and LG/Nortel — shows that Microsoft has the pull to draw in trusted suppliers whose gear IT execs have likely already signed PO’s for. And by committing to a standards (SIP) based platform, Microsoft hopes to drive economies of scale to eventually sell itself as the low-priced alternative to Cisco’s Cadillac-priced offerings in the IP voice arena. (Again, no pricing yet from Microsoft. Trust them at your own peril.)
Certainly, toys like the USB Bluetooth headset (which Microsoft says will dual-home to VoIP and cellphones, a pledge that couldn’t be proven in the demo) from LG-Nortel will serve as momentary VoIP-candy, but there’s still a long road ahead of Microsoft in its attempts to A) convince enterprise IT that it’s serious about telephony and B) overcome products already in the market from playahs like Cisco and Avaya, not to mention the burgeoning open-source offerings in the Asterisk arena.
But while it’s easy to poke holes in Microsoft’s offerings — like, say, its five pre-configured “presence” states, which seem laughable next to the on-the-fly customizable “don’t bug me” field in Google’s Gtalk — it’s important to remember that people who buy Microsoft corporate software buy in the thousands, not by single downloads.
And with a host of interested device suppliers on its side, Microsoft might not be able to ignore its commitment to telephony any longer. Now all we need is pricing and availability to let the battle really begin.
