Text Box: The Upshot Despite the murky and difficult-to-predict demand for voice telecom equipment, the 2005 outlook for these companies is a good one. The shift of purchase decisionmaking to IT departments has not taken any of the major players by surprise, and this awareness has led to efforts to increase network services, present of products in terms of platform capabilities, and an emphasis on applications solutions within (Continued on Page 8) ò Text Box: Page 7 ò Return to Page 1 Text Box: STC LINES—January 2005 Text Box: Equipment Maker Earnings Head North By HENRY BAIRD Text Box: In what is undoubtedly a welcome trend throughout the telecom industry, the major manufacturers of voice telecommunications equipment are all showing strong earnings growth. Reversing an industry trend that was at its worst in terms of net earnings during fiscal year 2001, Avaya, Cisco, and Siemens ICN all showed positive earnings for fiscal year 2004. Alcatel, whose fiscal year ended December 31, has not yet reported fourth quarter earnings. NEC Unified Solutions and EADS Telecom are parts of conglomerates that do not release net earnings by division. Mitel’s earnings are also unavailable. Cisco, the highest flying provider of the group in terms of steady earn-ings growth, had net earnings of $4.4 billion in 2004, compared to $3.6 bil-lion in 2003 and $1.9 billion in 2002. Siemens Information and Commu-nications Network Division has main-tained earnings at $287 million for 2004, up from a 2003 loss of $475 million, using a 1.3 Euro conversion. Avaya jumped to net income of $296 million in 2004 from a net loss of $88 million a year earlier. Nortel’s earnings reports for 2004 have been delayed. Revised 2003 earnings were $434 million, up from a restated loss of $2.99 billion for 2002. Alcatel, who should be announcing 2004 earnings within the next month, had 2003 earnings of $4.4 billion (converted from Euros) in its Private Communications Division. It’s All About IP-Telephony IP PBX Shipments Five years ago, when a pervasive concern about Y2K-readiness was a commonly accepted reason for accel-erated telecom equipment purchasing, IP-telephony spending was insignifi-cant compared to spending on the traditional voice systems. Text Box: Here at the beginning of 2005, IP-telephony has become a seem-ingly inevitable replacement tech-nology for TDM switching, and the dominant question among enterprise end users has switched from whether to adopt IP-telephony to how to adopt it. In fact, the October 2004 issue of Business Communications Review (page 8) presented Dell’Oro Group projections that IP-telephony would continue to rise in relation to tradi-tional, TDM-based PBX line ship-ments. This rise in IP-telephony, according to the BCR statement, will also drive other network equipment markets such as Ethernet switches and cable modem network infrastructure. Specifically, according to the Dell’Oro Group, IP PBX shipments represented nearly one-third of total PBX shipments in mid-2004, com-pared to 17% in mid-2003. End User Purchase Plans Although demand for IP-telephony equipment at the enter-prise level may appear to be distinct and measurable, the reality is that spending decisions are made at the IT level, where intentions to spend on voice network equipment are overshadowed by infrastructure planning and decisions regarding wireless voice and data services (now 25% of total telecom spend-ing, according to the Yankee Group). Decisions to deploy smaller IP-PBXs for use in environments with less than 100 users will be more frequent. From this perspective, “IP-telephony” is an enabling architect-ture shared by many applications. Indeed, the need for the “right” ap-plication is beginning to drive in-vestment decisions, with the choice of equipment just one area of con-sideration on a subordinate level.

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