Smartphone Increase Leads to Significant IP Mobile Backhaul Adoption
One of the most charismatic and energetic people in the carrier equipment market has to be Harold Braun (interview) the CEO of Harris Stratex, the largest independent supplier of wireless transmission systems in the world. The company supports broad frequency coverage from 4-38 GHz and capacities up to 1.2 Gbps. Their product lines consist of the TRuepont, Eclipse and Constellation among others.
I recently had a chance to catch up with this globe-trotting CEO and he was quite happy as he told me the market for mobile backhaul is growing at 6-8% and when you look more closely you see the majority of this growth is in IP.
You may recall I have spoken about Braun in the past when he was CEO of NSN. As he pointed out to me this week - he oversaw the transition to IP at Nokia Siemens networks and now has moved to Harris Stratex where he is able
to transition the wireless market to IP. In fact, Braun says that by the end of 2009 we will see more IP systems than traditional legacy mobile backhaul. This is an updated prediction which was once thought to be 2010.
Braun went on to say all the RFPs - regardless of where they are in the world are IP. He says the triggering event is mobile devices which are driving bandwidth use. Braun says carriers worldwide are looking to renovate their wired and wireless backhaul.
The opportunity for IP mobile backhaul is so large in fact the company is devoting most of its development resources in this space. Competition in the market comes from Alcatel-Lucent, NSN, Ericsson and NEC. Braun says his company is a market leader in the US and number four worldwide. When going up against larger competitors - smaller companies are often at a disadvantage. Braun pointed to company's speed, innovation and operational excellence as reasons Harris Stratex will be able to continue winning contracts worldwide.
When Braun came to the company, he merged different platforms in order to create one which can support mixed mode -- both legacy and IP solutions. This is a crucial point as the company is now able to support initiatives which start as legacy and need to evolve to IP over time. He can also use the same system to bid on green field opportunities.
Braun thinks 4G and beyond is another growth pillar. The company has WiMAX solutions which start from the PC data card to the core elements and network management pieces of the solution. He says his company is working with partners to develop a comprehensive LTE portfolio as well. Of course as he points out - these solutions will work well with the company's backhaul solutions.
Another area the company sees ready for growth is mobile security, surveillance and power management. Mobile operators are continually looking to reduce energy consumption. Braun says Africa and the US are two areas where operators are looking to reduce energy cost and for two completely different reasons.
In Africa, the cell sites run on diesel generators and they want to find alternatives. "They are simultaneously looking to secure their sites," he said. In the US, the reason carriers are looking for energy efficient solutions has to do with being green and more environmentally friendly/carbon neutral.
Braun's company is also focusing on network services where Harris Stratex takes a consultative approach to help customers in planning and design. They also build and operate customer networks and handle system integration and the FAA is one of their customers.
Braun tells me his company is just over $700 million in size based on sales - and is slowly approaching one
mbillion dollars. There are approximately 1,400-1,500 people working for the company worldwide he says.
While North America is where the company generates the most revenue, "Africa is coming up like crazy," Braun exclaimed. He went on to tell me revenue from Africa is approaching the level of the US. He says the growth curve is steep - even considering the macroeconomic environment.
Other comments regarding growth -- APAC is also growing quickly but Europe and Russia are suffering. The Middle East is doing well he says and Latin America is OK.
Braun reiterated the growth around the world is being driven by data applications on smartphones. "That is driver number one," he emphatically told me."
Braun mentioned his company recently surveyed its customers and in response to a question I asked regarding the status of global operators. According to the preliminary results which are still being analyzed, Africa and Asia Pac will beat their numbers and Europe and Russia are ratcheting it down. Some projects are being postponed and some planned projects will not start. These customers are telling the company that they want to reduce their CAPEX. They are hearing a similar message in the US. In Europe, some operators have cut their CAPEX in half for next year.
I asked Braun if we have seen the bottom and he mentioned the situation seems to change every week meaning it is difficult to accurately answer my question. He went on to say planning is difficult if the customers are not sure what they will do next year. He went on to say the company has a fiscal year starting in July and they are almost done with the second quarter. "Our first quarter was good," said Braun and he continued to add "We beat the expectations from Wall Street - we are a publically traded company."
Braun says he can't give guidance going forward and mentioned 2009 will be a tough year.
Braun made a comment which is in line with what I have been hearing from others. If you want to choose an industry - choose the telecommunications industry - especially the mobile industry. We will not be immune [to the downturn] but we have a good chance of surviving better than any other industry.
He summed up his thoughts as follows. The carriers put the smartphones on the market. The customers purchased them and are using them. When the carriers don't upgrade their networks with high bandwidth, they upset their customer base.
As an example, he mentioned in Russia the three big players brought the iPhone out on the same day and there was immediate data congestion. Braun reminded me the number one compliant regarding the 2G iPhone in the US was it was too slow because the bandwidth wasn't there.
He went on to say that buying microwaves is much more cost effective than purchasing T1s. He also said [wireless] data consumption is growing by 4-6-8 times year over year [depending on the market].
I asked about the WiMAX/LTE competition and he said for his company, WiMAX was always a bridge technology towards LTE but today it seems carriers have stepped up their roll outs of LTE technology. "Now the gap is closing," he said. He continued, "I would have thought we would have more WiMAX deployments by now and I don't see it."
Recently I implied people would rather give up their houses than their cell phones and this is still the case. As more applications and entertainment options find their way onto our pocket-sized devices, these gadgets become even stickier. And as the proliferation of devices and applications which support multimedia and other high-bandwidth files continues, wireless operators will be forced to upgrade their networks to keep customers happy. This should keep companies like Harris Stratex and others in a relatively enviable position.