For years, contractors have been purchasing product lines from Belden Inc., Cable Design Technologies (CDT), CommScope Inc. and Avaya Inc. Now, the future of some of these product lines could be changing in the wake of two significant mergers.
CommScope (www.commscope.com), based in Hickory, NC, completed the acquisition of the Connectivity Solutions business of Avaya (www.avaya.com), effective as of Jan. 31.
Just a few days later, Belden Inc. (www.belden.com), based in St. Louis, MO, announced that they and Cable Design Technologies (CDT) (www.cdtc.com), based in Schaumburg, IL, have formed a "merger of equals." The combined company, with sales of about $1.3 billion, will be called Belden CDT.
Both CDT and Belden are small in Europe, but a merger will enhance their position there, and certainly provide a more significant presence in North America. Lone Hansen, manager of IT Cabling and Contracting Worldwide Market Intelligence for BSRIA (www.bsria.co.uk), based in the United Kingdom, says CDT, for example, has 13% of the market share in the U.S. Belden, meanwhile, has 7% of the share. The two together will have a significant 20% of the market share.
Company representatives are touting the mergers as an opportunity to capitalize on synergies, implement best practices and eliminate duplicate costs. "It will make us more competitive in providing value to our customers," says C. Baker Cunningham, president of Belden. Cunningham will serve as president and CEO of Belden CDT.
But the mergers undoubtedly have raised eyebrows for contractors, many of whom could regularly purchase the companies' products from distributors who deal in the overly fragmented market. The companies say distributors will continue to offer all lines of products. Phil Armstrong, vice president of investor relations for corporate communication at CommScope, for example, says that his company's and Avaya's brands of connectivity solutions and cable for hybrid fiber coaxial applications will remain available.
"I think that they (contractors) will still have options, and that is a good thing," says Armstrong.
Hansen agrees, and says seemingly competing product lines will continue to be seen on distributor shelves. "More or less, these companies have a significant presence (with U.S. distributors) anyway, and I don't think that will be a big change," says Hansen.
No plans have been made concerning the certified training programs offered by CommScope and Avaya. And both companies say they have no immediate plans to discontinue product lines.
But there is a degree of uncertainty as the companies consider their futures. And both sides are hinting at pending change. CommScope, for example, states the acquisition puts it in a position to build on the popular Systimax solutions product line with "complimentary technologies."
This could work to the best, Hansen says, since it would be a mistake if the companies did not make product line changes. She says both merged operations should now be focusing on a branded product line, with one company name being attached to that product. "I don't know what their plans are, but if they want to have a bigger presence globally, they had better have one branded end-to-end solution," says Hansen. "It would give them a stronger profile and position."
Hansen continues, "Most markets in the global marketplace prefer branded solutions from one supplier. The cable production, for example, may be outsourced, but it's still carrying the same brand as the connectivity."
She also says the promises that all product lines will continue should not be taken too seriously. "We'll have to wait and see what they are doing," says Hansen.
Corporate changes won't necessarily be a bad thing for the industry at large, Hansen adds, and she says these two significant mergers won't likely be the last in the near future. Hansen says cable and cable component sales in the U.S., by value, are expected to be flat in the next five years, and the market itself has already dropped by 40% in the past two years. Europe is also a mature market and not expected to show any significant growth in the future.
As a result, cable manufacturers are facing a lot of pressure to cut costs, and manufacturers in the United States face increasing competition from manufacturers in Asia.
"There is a lot of pressure on supplier erosion in the cabling industry, but at the same time. many new manufacturers are emerging in Asia," says Hansen.
In fact, Hansen says newly merged operations such as CommScope/Avaya and Belden/CDT could help pump much-needed new blood into an industry that should now be revitalizing itself by building new, more value-added products. Cable manufacturers, Hansen believes, should now be pushing sales of 50-µm (OM3) optical fiber, and Category 6 cable, for example.
"They must increase new business areas, and offer more value-added products, such as management systems," says Hansen. "These would be more expensive, in terms of hardware but also implementation and training, and increase their profits and their revenues."
Brian Milligan is senior associate editor for Cabling Installation & Maintenance.