Are Computer Companies Losing Out?

Few eyebrows were

raised when the latest INFOTECH 100 issue of Business Week listed more

telecom equipment companies and telecom service providers--apart from

the Net companies--in the top 100 companies.

For quite sometime,

it seems the traditional computer makers have been isolated from the

M&A wave sweeping across the fast moving technology industry. The

wave, which is shaping of the future of the new Internetworked society,

has largely been initiated and is dominated by the telecom equipment

companies.

While their cash

richness certainly gives them an advantage, the whole game is not about

cash alone. This time, at least the telecom companies have been acting

smartly. Particularly, the comparatively newer companies like Nokia

and Tellabs, both in the top 15 in the Business Week list.

When Lucent acquired

Ascend, the shares of Lucent, and in anticipation the shares of most

networking companies, went up. The global media was full of stories

on its impact on the likes of Siemens, Alcatel, Ericsson, Nortel Networks.

No one wrote a word about IBM. Or HP. Or Compaq for that matter.

There have been

more such M&A. And every time the computer companies look more and

more helpless. On their part, most computer biggies do not react to

these developments, with a we-are-little-concerned kind of attitude.

It''s difficult to believe they are not concerned. What is more likely

is that they have failed to act promptly. And have let a big opportunity

almost go out of their hand.

The Impact



Data is winning the battle between voice and data hands down. And today,
even the biggest of the telecom companies like Lucent and Nortel acknowledge

that fact.

Then why is the

fuss about computer companies losing to the telecom equipment companies?

These telecom companies have realised and acted on the paradigm shift

much before the IT companies have done. And many of them have not been

lax in acknowledging the fact that they have actually done that.

The Nortel Networks

CEO, for example, says that his company has taken a 90-degree turn.

The computer companies are still in their own world, hardly reacting

to the change.

It is easy to dismiss

the M&A wave as primarily targeted at addressing the needs of the

carrier market. That view is short-sighted.

While it may be

true that the position of the voice companies vis-a-vis the data companies

will be further strengthened in the carrier market, a more alarming

factor for the computer companies is the impact that the telco equipment

makers will have on the enterprise market in the long run.

The hold over the

carriers will give the telecom equipment makers a route to the enterprise

networks, as the role of carriers in the corporate networks has increased

manifold. Today, many carriers are actively associated with the building

of corporate wide area networks.

A strong relationship

with carriers will be a strength that smart telecom companies can play

to their advantage. Anyway, enterprise is no longer a totally strange

territory for them.

The new telecom

companies with a strong hold over both voice and data technologies will

also be able to cater to the needs of the converged enterprise networks

better.Building and helping

operate large, complex networks is anyway their forte. No one understands

the network design and traffic management better than they do.

However, all is

not lost for the computer companies. Their hold over large general purpose

boxes--popularly known as computers--means that they can continue to

build versatile and more flexible applications and come up with new

things much faster than others. But they cannot afford to make that

fatal mistake. Of not admitting that they need to readjust wherever

necessary.

For the moment,

these companies are sidelined. While they may--and most probably will--bounce

back, one thing is for sure. That they cannot take the enterprise market

for granted. The telecom companies will soon offer them tough competition

there.

The computer companies

now have to fully leverage their strengths to fight back. And they have

a whole lot of that. One of them is not telling us time and again that

they are much smarter than the "conservative" telecom companies.