The decision by billionaire Alec Gores to buy the Siemens telecom business may be a signal that the longer-term fundamentals of telecom are stronger than many expect, or it may be an indication that Gores has taken one gamble to many. We have reservations about the space for the next two to three years, the period in which the sorting out of the new revenue paradigm will be essential for carriers to continue their equipment spending on players like Siemens.
There are favorable signs and challenges. Verizon’s report showed that data revenues were up, but the company conceded that most were linked to Blackberry-type phones and laptop access, not to mobile phone data applications, which means they were business related and not consumer. We believe that Siemens was later than most in recognizing the shift to the consumer, and that makes it a harder property to rehab.