Look Out World, Here Comes NEC!

by Jeff Wiener on June 17, 2010

It’s often amidst the more innocuous stories about quarterly earnings or banal market share reports that one finds the most interesting and engaging tidbits of information, that is if you know where to look for them. In a report released by the Dell’Oro Group, a reputable and trusted objective source for market information regarding the telecommunications and networking industries, it was found that the worldwide Private Branch Exchange (PBX) market, the foundation of business telephone systems, has dipped considerably in the first quarter of 2010, falling 5% over the last quarter of 2009.

The reason behind the market fluctuation, simply enough, is the instability of the Euro, due in part to the economic woes in Greece. Since a large percentage of worldwide PBX market is based in Europe and the Middle East, it comes at little surprise that economic hardships would negatively impact the telecommunications market in this way.

While the market downturn has negatively affected the overall line shipments of key telecommunications companies live Avaya and Cisco, with the former seeing a monumental 13% dip in unit shipments worldwide this quarter, the interesting news was that perennial IT follower NEC is now establishing a dominant market position. I guess slow and steady really does win the race!

With the news that Avaya has seen a significant dip in its overall line shipments and the fact that Cisco has remained stagnant in its market position, it is clear that the big winner in the first quarter of 2010 has been NEC, who has seen a significant 24% increase in its sequential quarterly sales. While the details of the Dell’Oro report have little interest for anyone outside the telecommunications industry, what the numbers indicate is that NEC is clearly on the rise, while Avaya and Cisco are struggling to tread water.

It will be interesting, however, to see if NEC can maintain this torrid pace of growth over the entire fiscal year, or even if it’ll last through another quarter. Most market analysts predict that this downturn in the telecommunications market will be temporary, as the impending recovery of the Euro and the European market as a whole will undoubtedly restore the worldwide PBX market to its former state.

In NEC’s favor, though, is the news that the IT company has just established a key center for European and Middle Eastern business operations in Turkey, meaning that when the European market does recover, NEC will have strategically placed itself to capitalize on it.

In the end, I have to say that I was certainly surprised to see that NEC was the only company to be making any significant inroads in the PBX market, as both Avaya and Cisco seem to be slipping from their lofty perches at the top. What I find humorous in this whole situation is that with both Avaya and Cisco busy watching each other’s backs in the competitive business telephone systems market, they both failed to recognize the silent threat posed by NEC, a perennial tortoise in the PBX market race who has, astonishingly enough, found itself at the front of the pack.

While it remains to be seen whether NEC can now solidify itself as a true market leader and maintain its place at the top, one thing is for certain, both Avaya and Cisco have been served notice, resting on their laurels in the competitive PBX market will only lead to one thing, a trip to the bottom.

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Written by: Jeff Wiener. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Identi.ca, or Friendfeed

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