Recession's impact: A bump or bloodbath?

The global economic recession has everyone attempting to evaluate their organization's performance compared to the market's performance.

The global economic recession has everyone attempting to evaluate their organization's performance compared to the market's performance. While the U.S. cabling market, specifically the structured cabling systems (SCS) market, has been impacted by the current recession, we have found from our recent analysis that the impact will vary from a bloodbath to a mere bump, depending on the metrics being used.

The one metric we have tracked for more than 20 years—on a quarterlybasis, providing a real-time picture of the market—has been plenumcable volume shipments. Plenumcable has been the largest product segment for LAN applications, which has been the major application for SCSs, and we have tracked this parameter through the double-digit high growth of the 1990s, whereupon the market saturated when the majority of LANs had been installed.

The market over the past five years can be described as meandering, with one major yearly decline but mainly flat with some minor decreases. That was the status, as we observed the quarterly growth rates through these years. Then came the fourth quarter of 2008, when we observed amajor decline—in excess of 20%. We track growth on a sequential quarter-to-quarter rather than a year-to-year basis. Therefore, this was a major development, indicating the recession had finally caught up with the SCS market.

Our recent analysis for 2008plenum cable shipments indicates an 8.1% decline from 2007. Our most recent analysis indicates a more moderate plenum cable shipment decline in the first quarter of 2009. Projecting a stabilization of the market, with even some modestgrowth on a sequential quarterlybasis for the balance of this year, we are now projecting the 2009 plenum cable market will decline by 12.1% from 2008.

Based on this analysis, it would appear as if the SCS market hasgone, and will continue to go, through a bloodbath in 2008-to-2009.

But another way to evaluate the SCS market performance is toanalyze the growth in the total value of all shipped SCS products—unshielded twisted-pair, coaxial,and fiber-optic cable, plus all asso-ciated apparatus devices. It also includes all cabling applications—not only LANs, but also new and evolving applications such as datacenters, VoIP, video over IP, and wireless networking.

Our data indicates that, on this basis, the total SCS market grew by 1.5% in 2008 and is expected todecline by only 4.3% in 2009.

This is a radically different picture from the one painted by lookingexclusively at the figures for plenumcable growth. Whereas plenumcable provided the prime metricwhen the SCS market was LAN-centric, the market has broadened to include numerous new cabling applications whose growth have offset the decline in LAN plenum cabling.

Our conclusion is that the SCS market will hit a small bump during this recession, with a smalldecline in 2009.

Editor's note: This article summarizes research findings in FTM Consulting's study, “Economic Recession Impact on the SCS Market.”

FRANK MURAWSKI is president of FTM Consulting Inc. (www.ftmconsultinginc.com).

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