Yeah, they are basically a network equipment company. But the misjudged bet on handsets is an example of the corporate overreach they indulge in. Another example was their endorsement of a Siemens/Alcatel 3G standard last year. Now Ericsson and Nokia control over 60% of the world's GSM network sales and they proposed a W-CDMA standard compatible with GSM as an upgrade, having worked on designing this third generation standard for over a half a decade. The Nordic companies basically created the GSM as an international standard and have a lock on European market.
And Alcatel seriously thought that the ETSI would pick a French/German 3G alternative to succeed GSM, slapped together by two companies that *combined* have perhaps 10% of the global GSM network market? The proposal had virtually no chances of passing, yet Alcatel spent millions in designing and promoting the standard. The money was wasted and more importantly, Alcatel wasted the time it could have used on getting a handle on W-CDMA. Now, nobody knows how succesful the W-CDMA will be and how long it will take for the companies to actually make money on it. But it's clear that companies that supported a rival standard (Alcatel, Siemens, Motorola) will never see any profit from the money spent on that, and may have fallen back crucially in developing W-CDMA products.
Another weakness of Alcatel is the lack of partners. NTT chose Nokia and Ericsson as its closest allies in developing W-CDMA, Nokia has close ties with ATT in handset biz, with Microsoft and Intel in developing new standards pertinent to both handset and network divisions, and with Ericsson in promoting their vision of GSM and its successor standard. That makes five of the richest, the most powerful IT companies in the world. Meanwhile, Alcatel is stuck with Siemens. I don't see this as a strategically fruitful partnership; two central European IT giants with small network equipment divisions and loss-making handset businesses hardly create much synergy. And Alcatel's achilles's heel is the lack of credibility outside of Europe. It's a profitable company with a strong position in central Europe, but it's hard to see Alcatel ever taking on Lucent, Nortel, Ericsson or Nokia in the network biz. I'm not sanguine about the fixed-line sector, either, for obvious growth reasons.
Tero
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