Nortel Might Incubate the Next Round of Consolidation Among Infrastructure Vendors
Posted By: Martin Gutberlet, Research VP (Gartner)
Nortel, the Canadian infrastructure vendor for enterprise and carrier products, outlined its strategy at the 3GSM World Congress, the world's largest mobile fair. For the enterprise division, Nortel formed an alliance with Microsoft in July 2006 to transform the traditional PBX business into a more software-driven and service-oriented approach to provide IP PBX solutions as a center of unified communications. In 3Q06, the enterprise division has shown single-digit growth. Nortel has given a clear commitment to the enterprise business.
The carrier part of the business, which accounts for 50% of the revenue, looks much more challenging. After the exit of 3G radio access network, which was bought by Alcatel-Lucent, Nortel hopes for an early and massive uptake of WiMAX and Long Term Evolution (LTE) of public mobile networks, the next standard after UMTS. The Canadian supplier even sees a need for mobile operators to upgrade directly from 2G to LTE. Gartner remains skeptical about the early adoption of WiMAX and LTE. Furthermore, most existing wireless operators deploying 3G networks are struggling with low uptake of mobile data. Therefore, the need for extended mobile broadband is limited and might not occur in the next two to three years. Nortel also stated that due to cash-flow improvements, investment in carrier services, especially around outsourcing, is unlikely.
The enterprise division obviously has a more comprehensible strategy than the carrier business. Therefore, the scenario of a Nortel breakup might become a reality in 2007. I can foresee a next-generation Nortel that provides only enterprise services. Maybe Alcatel-Lucent will express its interest in the remaining carrier business, and Nortel will take over its enterprise unit. Alternatively to the swap deal, Nortel might sell off the carrier business and try to acquire Siemens Enterprise Communications. Nortel may very well incubate the next round of consolidation, in both the enterprise and carrier infrastructure businesses. |
