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May 11, 1987

PLESSEY, GEC PLAN BABY SYSTEM X EXCHANGE FOR EXPORT DRIVE

By CBR Staff Writer

Plessey Co and GEC Plc are preparing a new attempt on the export market for telephone exchanges with a version of System X a fifth the size of the standard version sold to British Telecom, reports our sister paper Telegram. GEC and Plessey will be exhibiting the second generation System X on a joint stand at Telecom ’87 in Geneva in October that will be separate from the companies’ individual stands. This implies that the two companies will form a joint company to push the product into overseas markets: GEC says that negotiations are continuing on formalising joint development and overseas marketing. The private venture System X follows the ending of development funding for the exchange from British Telecom. Plessey and GEC now have to compete for Telecom orders not only with each other but with Thorn-Ericsson as well. The new export effort will be the latest of several attempts; in the past there have at various times been joint GEC-Plessey-Telecom, and GEC-Plessey-STC export ventures. Plessey says the target export areas are the Far East, including Indonesia and the Philippines, the Middle East, South America and the Comecon countries, including Bulgaria and Russia. Plessey’s main experience of selling overseas is through its Stromberg-Carlson subsidiary in the US. Stromberg sells its DEC LSI-11/73-based switch into the medium to large local exchange market and not the large switch or central office market. Plessey feels that the LM Ericssons and Siemens of the switching market are wrong to attempt to sell their exchanges into the large switch market. There is only a market for about 1,000 systems and they are all operated by the Bell operating companies and supplied in the main by AT&T. Plessey believes that European and Japanese companies are having to spend around $1,000m each on modifying equipment to conform to US standards before they can start competing; the same broadly applies in reverse, which is why Plessey is not talking of marketing the Stromberg switch outside the US. Stromberg’s view is that over 50% of US telephone subscribers are connected to exchanges with fewer than 1,500 lines and 90% of switches sold into the US are for 25,000 and below line units; the thinking behind the new baby System X seems to be that there are many developing and sparsely populated countries whose telephone needs would be better met by distributed smaller exchanges rather than two or three enormous main exchanges. Plessey and GEC face an estimated shortfall of about UKP80m on System X deliveries to British Telecom this year because Telecom has fallen behind in its programme to link the exchanges it has to network; it is therefore not yet ready to take delivery of all the ones ordered.

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