Nec Switches Its Switch Strategy

How tough is the U.S. market for phone-company switches? Tough enough to force a retrenchment by one of Japan's premier electronics companies. After 10 years in the U.S. market, NEC Corp. has quietly informed its customers that it won't sell any more of its current switch line because the line is losing too much money. NEC will keep servicing existing switches, but it plans to provide only one more generation of software. As a result, some customers may decide to replace NEC switches far sooner than previously anticipated. Cincinnati Bell Inc., owner of six NEC switches, says NEC's decision may hamper its ability to meet the long-range needs of its customers.

NEC says the retrenchment will give it more time and money to focus on advanced technologies for the U.S. market, such as a new type of high-speed digital switch called asynchronous transfer mode. NEC recently agreed to sell eight of the new switches to WilTel Inc., a long-distance carrier based in Tulsa. Says Gerald A. Shanholt, NEC America Inc.'s senior vice-president for public switching: "Our strategy is simple: Get in when it's a small market and capture the early opportunities."