Subject: [NEXTEL-1] IBM May Prove Big Help to Struggling Telecom Sector

From: Marcel <[email-masked]>
Date: Sun, 29 Dec 2002 12:49:58 -0500

IBM May Prove Big Help to Struggling Telecom Sector
Source: The News & Observer
Publication date: 2002-12-28

Dec. 28--Big Blue could be a white knight for the troubled phone sector.

The world's biggest provider of computer-related services has increased its
consulting and product offerings to help carriers cut costs and bolster
business plans as they rebound from the lagging economy. It is teaming up
with equipment makers and other vendors to help shape a recovery -- and
boost its own bottom line.

"The whole dot-com run-up and fall off has put tremendous pressure on the
industry," said Joe Ziskin, director for IBM global telecommunications in
Atlanta. "That's where our focus is: to help the industry through this
transition."

A report by IBM's consulting division last week predicted the
telecommunications sector will remain challenged through 2006. Although it
expressed some optimism, it said wired and wireless companies must form
alliances with other industries, give customers constant connectivity and
develop more focused strategies to recover from the downturn.

Assisting companies such as BellSouth, AT&T and Cingular with those
efforts could prove lucrative for IBM, analysts and investors said. The
company needs to grow, and building stronger ties with communications
companies, which account for as much as 10 percent of revenue, could help
it sell more software and services when capital-spending budgets revive.

"The telecom service providers are major customers of IBM," said John
Rutledge, portfolio manager for Wachovia's $12 million Evergreen
Technology Fund. Rutledge says IBM is his second-largest holding. "IBM
probably wants to get more deeply involved in offering services to them."

About 200 people at IBM's Research Triangle Park campus focus on the
telecommunications sector, and many more of its more than 13,000 local
workers in the software, global services and research divisions contribute,
Ziskin said. That puts the area among IBM's "major" telecom hubs, along
with Atlanta and New York.

IBM for years has supplied gear to phone companies, mainly to help with
billing and operations needs. But about 18 months ago it began to shift its
focus to partnerships to help guide the industry, Ziskin said. Since then, it
has announced several deals that could boost the sector and itself.

In January, for example, it scored an agreement with Nextel
Communications to handle customer-support operations for the nationwide
mobile phone company. The eight-year pact will save Nextel more than $1
billion.

Earlier this month, it announced an alliance with Intel, AT&T and two other
companies to build a high-speed wireless network in the top 50 U.S. metro
markets. The alliance will lease access to phone companies, Internet
service providers and mobile-phone companies so they can resell service to
subscribers.

It also is talking with local phone companies about a service to help
customers use the Web for their communications needs.

The market "is constantly changing and they want to be able to maintain, if
not expand, their offerings," said John B. Jones, an analyst with
SoundView Technology Group in San Francisco. "It's all about greed."

In addition to the partnerships, IBM also is tailoring software and equipment
to meet the needs of the telephone industry, which often has higher
standards because its networks must always work.

"We're kind of looking at this as how can IBM, as a very definite [information
technology] infrastructure player, as a very definite consulting and services
player, construct some solutions É to drive the industry to where they need
to be," Ziskin said.

Giving IBM its best entree to the telecommunications industry is the
consulting division it bought from PricewaterhouseCoopers earlier this year.
The unit for years has sold advice to phone companies and other industries,
giving IBM better access to executive suites. Analysts say that was a key
reason IBM bought the division in the first place.

"They're trying to leverage on that," said Jim Luke, director of growth equity
portfolio management at BB&T, which has 55,000 IBM shares in its Large
Cap Growth fund. "That what would give them credibility."

To be sure, IBM faces stiff competition from companies such as
Microsoft, Accenture and Hewlett-Packard as it seeks to advise
companies. And there's no assurance that even the muscle of a company
such as IBM will help a recovery.

-----

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to http://www.newsobserver.com.

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