It isn’t just software companies and telcos that are facing a changing, less profitable, world. As margins decline for their enterprise customers, equipment vendors are facing the squeeze.
A good example of this is Sweden’s Ericsson which last week announced declining sales as China’s Huawei displaces them in market and their enterprise and telco customers tighten budgets in the face of declining margins.
For Ericcson this means finding new opportunities but for them, like Cisco and Microsoft, most of the promising markets offer nowhere near the profits they have been used to in their traditional businesses.
Managers in these industries face a difficult dilemma in explaining to shareholders their company needs to be smaller and less profitable than previously which is something few want to hear.
Not to admit that painful reality risks killing the company as margins continue to shrinks, sales shrivel and desperate managers engage in increasingly desperate stunts in the hope on stumbling on another river of gold.
It’s an ugly place to be for staff at these companies but it shows that fat profits can never be considered to be given in any industry.