WiMAX a crucial piece for vendor success

Things aren't looking too great for the industry's vendors. Last week Ericsson issued an unexpected profit warning [1] that sent the vendor's share price tumbling nearly 30 percent. Ericsson cut its guidance for the third quarter, citing a decline in sales for its mobile network upgrades. The world's largest infrastructure vendor expects the slump to continue into 2008.

Meanwhile, missed revenue goals, thousands of job cuts and executive departures are making Alcatel-Lucent an easy target [2]. And Motorola continues to struggle with steep losses in its handset business.

Ironically, despite the fact that not all of these vendors have embraced WiMAX, it is WiMAX that could have a dramatic impact on the direction of these vendors' businesses.

Last March, Ericsson said it had stopped developing WiMAX [3] to concentrate on LTE (Long Term Evolution). Ericsson has said it doesn't foresee volumes coming from the WiMAX market, and it has been busy convincing operators that HSPA is a fine interim solution as they wait for LTE. But WiMAX is heating up, and the stamp of approval from the International Telecommunication Union (ITU) as a 3G standard last week could ensure a broader deployment of the technology around the world. (Ericsson was reportedly one of the opposing forces of that move.) Can Ericsson convince the world's operators that HSPA is a better solution until LTE comes along [4]?

The stakes are equally high for Alcatel-Lucent and Motorola. Alcatel-Lucent needs WiMAX to break out of its slump that involves battling it out with Ericsson and Chinese vendors such as Huawei for UMTS/HSPA upgrades, which are slowing. Alcatel-Lucent has been using WiMAX to rally itself back into the good graces of investors by touting itself as No. 1 in the worldwide WiMAX market with more than 70 pilots and deployments across the globe and 15 commercial contracts signed since the beginning of 2007 [5].  

Motorola is the vendor with the greatest reliance on WiMAX for its future success in the mobile infrastructure business since it doesn't have any significant growth in UMTS/HSPA. It also makes big claims for the rate of trial and adoption of its mobile WiMAX systems, including a deal with Sprint Nextel. For sure, WiMAX has significant momentum but a host of uncertainties still lie ahead for WiMAX, including the fact that it actually has to demonstrate a full-scale commercial deployment and prove the incredible cost benefits that pundits have placed on it.

For both Alcatel-Lucent and Motorola, mobile WiMAX is their best hope for a major growth spurt, while Ericsson is hoping the WiMAX market will lose some steam when "reality" sets in. -Lynnette [6]