Europe's floods may boost sales for IT manufacturers

Floods in Europe are expected to bring new business opportunities for local networking equipment makers, an information industry watcher said yesterday.

"With a lot of telecom networking equipment located on lower levels [of buildings] damaged, companies will have to reprocure these products as soon as possible to resume operations," said David Chu (儲祥生), a deputy manager at Reliance Securities Investment Trust Co (德信投信).

Networking-equipment products include cable modems, ADSL, switches, hubs, integrated services digital networks (ISDN), local area networks (LAN) and wireless local area networks (WLAN). Taiwan is a major manufacturer of these products.

He added that local manufacturers such as D-Link Corp (友訊), Zyxel Communications Co (合勤), Accton Technology Corp (智邦) as well as Askey Computer Corp (亞旭) may possibly benefit from the new demand.

"Zyxel, which ships more than 50 percent of its annual ISDN production volume to Europe, may get the most significant order infusion," Chu said.

But another industry analyst expressed skepticism, saying the order increase should be very limited.

"The number of households using high-speed Internet connections in eastern Europe is very small and therefore the demand to replace broadband networking equipment is low as well," said Liang Sheng-kai (梁昇凱), an analyst at the Market Intelligence Center (市場情報中心).

The broadband-service penetration rate in eastern Europe is less than 2 percent, which lags far behind western Europe's.

In addition, most of the flooded areas are not metropolitan districts, but countryside where not many companies set up offices and locate networking equipment, he said. "But, without any doubt, this destructive flood will more or less stimulate people to replace old-technologies such as dial-up modems with new technologies such as ADSL connections."

Meanwhile, the Bloomberg news agency reported yesterday that the flood has damaged optical wires located in the Prague subway and costs for reconstruction of the subway alone may reach as much US$126.2 million.

Taiwanese firms such as Prime Optical Fiber Corp (卓越光纖), UFO Communication Co (聯合光纖), and Tai-lin Optical Fiber Co (台林光纖) may gain new orders on the news.

"However the real affect my not show up in the short term, with all large-scale procurement projects having to go through time-consuming bidding process," Chu added.