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Follow UsIf news from the US is to be
believed, it will take much longer than six to nine months for the market to
upturn. When yesteryear's star companies report operating quarterly losses of
over a billion dollars, you do really wonder where the market is really heading.
Take Nortel for instance. It
reported an operating loss of $1.02 billion in the second quarter, while
its total quarterly loss is estimated at a staggering $19.2 billion.
This is only the second biggest
quarterly loss reported in the US business history so far. The other biggest
loss of $21.1 billion was reported by General Motors way back in the first
quarter of 1992.
How have Nortel's losses come
about? The company had to write off old inventory and other assets and bad
debts. This phenomenal loss also includes costs involved in laying off an
additional 10,000 people and closing down nine million square feet manufacturing
and office space.
A close look at companies
suffering huge losses, reveals a disturbing fact that the network equipment
manufacturers have been the worst hit. The news of Nortel's loss has come after
Lucent announced a quarterly loss of $1.02 billion.
Earlier Cisco too had announced
huge losses. There are reports that 3Com wants to sell off its vacant real
estate after laying off thousands of workers.
Three things come out very
clearly from the battering of the network equipment manufacturers. One, the
growth of the Internet will suffer. Companies betting their prosperity on the
success of the Internet will have to come out with back-up strategies to survive
the longer than expected lean period.
Second, enterprises have reached
either a saturation point with respect to networking their operations or they
are waiting for business to pick up before expanding further. This is bad news
for systems and network integrators.
SIs and NIs have to take a fresh
guard because it is their business that will suffer the most in the present
context. The buying from government and financial institutions though looks good
currently, cannot last too long.
That is when the adverse impact
on SIs and NIs will be felt the most. They have to look for newer opportunities
and greener pastures like IT-enabled services where systems and network
integration plays a major role.
Third, the market upturn looks a
distant reality. Gone are the days of talking in terms of six to nine months to
recovery. It is no more hype or perception that there is a slowdown.
The market slowdown is a
full-blown reality today and the fact is that the full impact of the US slowdown
is yet to be felt in the country. Partners have to gear themselves up to face
even harsher days ahead.