Alcatel bid reflects Internet race lag
Reuters - 09:55 a.m. Mar 02, 1999 Eastern
LONDON, March 2 (Reuters) - Alcatel of France's takeover of Xylan Corp is the latest
move by telephone equipment suppliers to make up lost ground in the race to provide
the infrastructure for booming Internet traffic, experts said on Tuesday.
More deals are expected with companies like Sweden's Ericsson AB and Siemens AG
of Germany reportedly eyeing companies which make the equipment linking computers
over the Internet, pumping electronic mail and digital data around the world.
''This deal shows that convergence is finally happening, at least from the supplier side.
The thing that focuses all the traditional voice companies - Alcatel, Nortel (Northern
Telecom Ltd), Ericsson is the Internet,'' said Colin Corrill, analyst at technology
researcher Romtec.
''They've come late to this game, but traditional voice vendors are deciding they must
be in data. They've got pots of money so they can afford to make these buys,'' Corrill
said.
Alcatel said on Tuesday it agreed to buy Xylan of the U.S. for about $2 billion. Xylan
makes high-bandwidth switching systems mainly for business customers' data traffic.
Other recent deals in this field include Lucent Technologies Inc's $18.5 billion takeover
of Ascend Communications Inc, and Northern Telecom's acquisition of
California-based Bay Networks.
According to market researcher Datamonitor, traffic generated by data over the Internet
is growing at around 1,000 percent a year and will accelerate past traditional telephone
voice business in 2000. The expansion rate of the latter is under 10 percent.
''This represents the move from the old world to the new with the convergence of
voice and data,'' said Datamonitor analyst Wastif Khan.
Khan said technology had been moving fast and this had forced big telecommuncations
equipment makers to buy new core competencies. They did not have the time for their
own research.
Analysts said Ericsson and Siemens had yet to make big moves in this field, preferring
to deal with partners rather than making takeovers.
Chris Lewis, telecoms analyst at the Yankee Group, agreed that equipment makers had
often been left behind by technical developments. Not all would seek acquisitions to
remedy this.
''Siemens has not been in the acquisition stakes and has decided
to partner with equipment companies like 3Com (Corp) and Newbridge
(Networks Corp),'' said Lewis.
But Datamonitor's Khan believed that companies that had declined the takeover route
might still step in.
Khan said companies like Dialogic Corp and Juniper Group Inc
of the U.S. could be targets. In such a fast moving world it was possible to even
imagine companies like Alcatel becoming takeover targets.
''Ericsson and Siemens haven't made major purchases into the data IP (Internet
protocol) world as yet, but they're certainly looking into it,'' Khan said.
''There are rumours that Siemens might bid for Newbridge,
3Com might be too big.
And Cisco Systems Inc, the world's leading Internet enabler, could even go ahead and
buy a telco supplier like Alcatel. That would be a purchase in the other direction, just to
look back into the old world if you like,'' Khan said.
o~~~ O |
