Alcatel-Lucent is to cut its investment in WiMax as it tries to reduce costs.

The company is going to pin its fourth-generation mobile broadband hopes on the rival LTE (Long Term Evolution) technology aimed at telecommunications operators.

The telecommunications sector is going through some tough times: Alcatel-Lucent expects the market for equipment and related deployment services to drop by between 8 percent and 12 percent at constant exchange rates, forcing manufacturers to adapt their business plans.

In the WiMax space Alcatel-Lucent has decided to stop developing its own mobile WiMax products. It was a tough decision, but the right one, said Ben Verwaayen, CEO of Alcatel-Lucent.

Instead, the company will look to partnering or co-sourcing to cut R&D spending. Alcatel-Lucent also will reduce spending on customer premise equipment, some legacy applications and its portfolio of fixed-line telecommunications products not based on the IMS (IP Multimedia Subsystem) core.

The company will, however, continue to develop fixed-wireless WiMax as alternative for DSL, according to Verwaayen.

Alcatel-Lucent pulling away from the mobile WiMax market comes as a bit of a surprise to Richard Webb, directing analyst at Infonetics Research, but he said that it was understandable.

"It's no great secret that LTE will be the bigger market, and mobile WiMax will be the little brother," said Webb.

Nortel moved to cut spending on WiMax earlier this year when it announced a partnership with Israeli vendor Alvarion.

Alvarion has overtaken Alcatel-Lucent and Motorola in the mobile WiMax market, according to Infonetics.

Worldwide sales of fixed and mobile WiMax equipment dropped by 21 percent in the third quarter compared to the second quarter, and are expected to continue sliding through 2009 as the economic recession puts the squeeze on this early market, according to a report from Infonetics.

On the other hand, it will continue to push include broadband access, IMS core and CDMA (code-division multiple access) EV-DO (Evolution-Data Optimised) network infrastructure equipment, and will boost investments in LTE and 3G (third generation) mobile networking equipment, enhanced packet core equipment and open application enablers.

All current mobile networks, including GSM, CDMA and 3G networks will all merge into LTE, which will be fast out the box, according to Verwaayen.