Daily Spin: Evaluating Alcatel, Lucent Hookup

Though strongest in the carrier market, the combination of Alcatel and Lucent this week will impact enterprise IT as well.

April 5, 2006

4 Min Read
Network Computing logo

The Big Picture

Evaluating Alcatel, Lucent Hookup

In the networking market these days -- especially at the high end -- it's all about size and scale. So while Alcatel and Lucent spent almost five years contemplating a deal -- in the process quibbling mainly about who would be in control of the combined company -- in the end the combination of these two giants was inevitable. Carriers are merging at an alarming rate; the vendors that supply them need to combine to keep negotiating pace.

A few interesting sidenotes to this deal:

- Even though considered a "merger of equals", Alcatel shareholders will own about 60 percent of the combined company, Lucent 40 percent

- The combined company has sales of just over $25 billion, just about the equal of Cisco Systems. Vendors are consolidating to pursue the massive opportunity of combining voice, data and video traffic on emerging consolidated network infrastructures.- National security issues complicated the deal on both ends. Alcatel was looking to raise its stake in defense electronics group Thales; that deal may go by the wayside now. Meanwhile, Lucent plans to create an independent U.S.-based subsidiary to handle sensitive security-related research work with the U.S. government.

- At one time, Bell Labs was the preeminent pure research institution in the world, responsible for groundbreaking work in areas ranging from transistors, lasers, optics, wireless technology and the Unix operating system. While the combined Alcatel/Lucent paid lip service to ramping up R&D, the merger represents another step in the marginalization of this once great research facility.

- Speculation immediately moved to which vendors might be the next to merge. Among those under the most pressure: U.S.'s Nortel, Finlad's Nokia and Germany's Siemens. All of those potential deals, as well as the smaller buy-ups that happen at the lower-end of the market, require close watching by enterprise IT managers.

- Vendor consolidation mirrors carrier consolidation. In the past year or so, Cingular and AT&T Wireless and Sprint and Nextel have merged. Verizon acquired MCI. AT&T was bought out by SBC Communications, and those combined companies then agreed to buy BellSouth.

NWC's Take on the News

Here's what we think of today's breaking news. Read the story and leave your own comment. Let's see if we agree ; >

Small Businesses To Be A Huge Storage-As-A-Service OpportunitySmall businesses represent a huge opportunity for providers of storage as a service, according to IDC, with the acceptance of storage as a service by small businesses growing as they get used to the idea that much of their business data is already being handled by third parties.

NWC's Take:Storage isn't the only opportunity: Web hosting; sales, accounting and CRM; and a wide array of other software-as-a-service markets should appeal to small businesses as well.

ID Theft Hits 3.6 Million U.S. HouseholdsAn estimated 3.6 million households reported being victimized by identity theft in 2004, about three percent of all U.S. homes.

NWC's Take: The initial theft is only the start of the problem. Cleaning up typically takes a week of effort and a small but significant portion of victims end up getting hit for a second time as well.

Microsoft Offers Virtual Server R2 Free, To Support Linux GuestsMicrosoft made a big splash at LinuxWorld on Monday, announcing the availability of Virtual Server 2005 R2 as a free download and making a pledge to support "select" Linux virtual machines on its platform.

NWC's Take:Virtualization is an important new capability so Microsoft turns to usual tactics to try to freeze market while it builds its own technology -- Virtual Server 2005 -- to catch up to rivals.

Dell, Apple Lead In Brand Trust, Microsoft Dead Last

Annual survey by Forrester Research also showed an across-the-board drop in trust in personal computer and consumer electronics brands.

NWC's Take:Bad news for Microsoft as the ship date of Vista for consumers slips out of the 2006 Christmas season.

Stay informed! Sign up to get expert advice and insight delivered direct to your inbox

You May Also Like

More Insights