Published On: Mon, Mar 9th, 2015

4Q Vendor Financial Index Results: Ericsson Jumps into the Low-Risk Category

ACG Research has released its 4Q Vendor Financial Index report, which delivers independent information about the sustainability of a vendor or company to help providers assess the risk of selecting the right vendor to meet their business requirements and to ascertain a risk level on the stability of the vendor regardless of technology innovations.

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Low-risk vendors for the quarter are Adtran, Brocade, Cisco, Juniper and Ericsson. Characteristics of low-risk vendors include strong revenue outlook, high operating margins because of sales, solid gross margin and expense discipline, low debt dependency, and high receivable efficiency ratio. Adtran’s growth continues with new product launches, such as high- performance routers, momentum of TA 5000 and FTTN platforms, and new product wins in EMEA, which will contribute significantly to the company’s revenue in 2015. Brocade, which is focusing on efficiency, is targeting software networking investments, advanced fabric switches and datacenter markets. Cisco’s diversification strategy of relying less on specialized routers and switching devices and more on rolling SDN tools and security services will add to growth in 1H15. Juniper continues to pursue its restructuring plan, cost cutting initiatives and diversification of revenue with the goal of increasing efficiency in delivery of services and customer support. Ericsson’s sales in most regions are expected to increase sequentially in 1Q15 with rising demand for managed services, consulting and system integration.

Cyan, Ciena and ZTE are high risk, which is characterized by low inventory turnover ratio, revenue decreases and low value of equity to debt ratio. Cyan’s cautious ordering pattern by its customers will impact the revenue in 1Q15, which is estimated at $30.2 M. Ciena’s substantial segment of its revenue continues to come from sales to a small number of service providers. The firm is focusing on diversifying and broadening its customer base and increased spending on optical upgrades and higher number of international orders should positively impact its top line in 1H15. ZTE’s will continue to focus its efforts on major global carriers and government segments. Future growth will rely on flagship device range.

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