Why the Street’s Antsy About Tech

Acme Packets, one of the growth leaders in the network equipment space as far as the Street was concerned, did a surprise pre-announce of a less-than-expected quarter.  Supporters of the company have rallied around the notion that this is somehow just a transient blip.  Yet the company told investors that the shortfall came from a bunch of geographically scattered deals they’d had 50% confidence or more they could close, and somehow didn’t.  That sounds a bit broad to be transient to me.

I think the problem here is the old issue of ARPU.  Look at voice calling from an operator perspective and you see a market that you’d really have no reason to want to be in if you weren’t there already.  ARPU in wireline has plummeted.  ARPU in wireless voice is already negative in most markets, with broadband growth likely to keep it positive overall for not much longer than another year.  The largest OTT voice provider, Skype, has been bought by Microsoft, and while the Windows giant might well run it into the ground, they might take it somewhere that would be transformational.  Google Voice, fearing what Microsoft might do, could jump out to try to beat Microsoft to the punch.

What seems to be true here is that if you’re a vendor who can roll out LTE you’re still engaging with carrier buyers almost without positioning effort (you’ll have competition, though).  If you’re not, then you have to fight for engagement.  The longer this problem lasts, the harder it will be for vendors to break out of the pattern, because engagement and disengagement are both contagious; you disconnect and you lose touch with the issues, which makes you less relevant, which makes you disconnect further.  I don’t doubt for a minute that we’re going to see players step up and sing new and interesting songs in the first half, and by doing so raise their relevance.  I don’t doubt we’ll see players fail to do that, and lose more market share.

The Street has also been talking a lot about enterprise. Their view, like the one I expressed in Netwatcher last month, is that IT spending in 2012 isn’t going to be strong but that there’s a chance of recovery in 2013.  Their thesis is that the 2012 problem is largely due to economic uncertainty, which I agree with.  They think that’s going to be eliminated by 2013, and I hope they’re right.  In any case, I still cling to the fact that if IT improves productivity then IT should be doing BETTER in a period like this.  The fact that we’re calling 2012 a down market means that we’re admitting to the fact that IT has failed to deliver on new productivity paradigms, which is also what my numbers have said.

The fact that storage, in mid-sized-and-larger firms, is the hot IT space according to the Street is an indicator that we’re placing our bets more on business intelligence or data mining.  Those are IT and processing functions, and they are great for making better business decisions if you assume that the knowledge to understand a new optimality was collected and stored even though you didn’t recognize the value at the time.  I wonder how true that is.  Productivity is like warfare; you win it with boots on the ground, at the place where the work and the worker intersect.


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