Telecoms equipment vendors squeezed

It is said the dot-com bubble burst. If that's the case, then the telecoms bubble exploded, leaving its contents dripping from the industry's greedy face.

Siemens is the latest victim. It has reported a loss of £301m for the three months ended 30 June. The company's phone chief, Roland Koch, was last seen wandering into the car park carrying a cardboard box under his arm and waving a pink slip. His department reported the greatest loss.

Last year, telecoms equipment vendors were riding high - paying extraordinary amounts of money for a technology was years from the mass market, wheeling and dealing their way to bigger, better partnerships and alliances.

Banks loved them, investors loved them - even carriers and auctioneering governments loved them. It was an accident waiting to happen. Was nothing being learned from the worsening dot-com doom and gloom?

But then the US started to sneeze across Europe and banks started to get scared about lending any more money to fund - what is at its most basic - the move to packet switching.

This was swiftly followed by the bottom dropping out of a handset market almost saturated in many countries. What's more, many existing users began upgrading their phones less frequently.

Senior management - anxious to keep up ROI percentages and timelines - started to feel squeezed. The consequence was vendors outsourcing handset production quicker than you can download a ringtone. They want to pass on financial risk and cut down on complexity.

The same management has since become disillusioned and, rather than wait to be pushed, they have started jumping ship. Nortel lost the man rumoured to be next in line to its CEO throne and now Siemens' man is off.

Suddenly it doesn't seem so surprising that after a two-year boom, telco vendors are predictably peering over the edge of an abyss.