Re: Legacy Networks- ALA/NN Strategy
Jim- Not too long ago we had that productive conversation about Last Mile investing. It's kind of linked to above in the, "who wrote," links. I think my main one fell out of the chain though. Maybe some of yours to.
Anyway, I found this nice little article today which sums up quite nicely my personal opinion of how important legacy networks are. Especially in light of all the excitement recently generated by true all optical switches, fiberless light, and dumb networks. Funny how George Gilder is connected to all three manias.
It's still of my opinion, that the real revenue generators for BOTH equipment providers AND service providers will be from the good old, here and now stuff. IMVHO, that's why I like the ALA/NN deal. You take ALA's expertise in, here and now, access technology. Combine with NN's, here and now, working, cheap, ATM edge expertise. And it's a great combo for Service Providers to rollout real world services TODAY.
Flynn kind of summed up my philosophy as an investor in the telecommunications infrastructure sector.
"I'm not into religious wars, I'm just into winning business," said Pearse Flynn, president and chief operating officer at Newbridge Networks."
Notice the time frame for ATM life in the backbone given by the SPs Pearse talked with. Well IMVHO, per my techtime rule, 5-10 years means 10-20 years. I'll be keeping my eyes open for any signs I'm wrong. -MikeM(From Florida)
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Newbridge Deal Gives Boost to Alcatel's Networking Strategy
By Ian Scales
06 March 2000- To hear Newbridge and Alcatel executives tell it you'd think last month's worst-kept secret - the stock swap acquisition of Newbridge Networks Corp. by Alcatel SA, valuing the Kanata, Canada-based network equipment vendor at $7.1 billion - was a match made in heaven.
With Newbridge in the group, Alcatel, of Paris, will likely jump one place to number three in the carrier equipment vendor rankings, behind Lucent Technologies Inc. and Nortel Networks; it will flesh out its data equipment portfolio; and it will strengthen its offering in the DSL market, with Newbridge providing ATM data networking gear and network management for the critical transport network between local exchange and ISP premises.
Newbridge will also bring broadband radio products, a substantial North American customer footprint; and will add another 2,000 or so valuable network engineers to aid Alcatel's claim on next-generation carrier network investment.
"This is more than just another acquisition," said Alcatel's chairman and chief executive, Serge Tchuruk, announcing the deal. "It will have a strong influence on the way we do our business and positions Alcatel in the top three players worldwide. Newbridge brings the core and edge switching; Alcatel brings the Internet access."
But analyst and observer response so far, particularly in the United States, has involved more face slapping than back slapping. Both Alcatel and Newbridge share prices dipped sharply on the news, and a week later Alcatel's U.S. share price has yet to recover fully. While the merger will initially dilute Alcatel's earnings per share - hence the drop, according to Alcatel executives - there has apparently been little market recognition of all that medium-to-long-term synergy.[the power of the media<g>]
Put simply, the U.S. financial markets are as yet unconvinced that Alcatel is capable of stewarding Newbridge, in the revenue doldrums for the last two years, back to enough financial health to justify that $7.1 billion valuation. It is a judgement call that perplexes some European onlookers.
"U.S. analysts appear to have a blind faith in what Cisco Systems, say does in terms of acquisitions, but don't yet believe that Alcatel can do the same," said Chris Lewis, a data networking specialist at consultancy the Yankee Group Europe, in Watford, England. "The move actually does fit together really well." In particular, he added, the Newbridge products help move Alcatel away from its current reliance on the "old" revenue streams from its incumbent carrier customers, just what the markets have been asking for.
And both Alcatel and Newbridge executives point out that Alcatel has already proven its ability to integrate other companies and their product lines, citing what they claim as the successful integration of carrier equipment vendor, DSC Communications Corp., bought in August 1998. "It may be that Alcatel is just not seen as being a wheeler-dealer," said Lewis.
But another reason for the muted response may be a market perception that Newbridge is really an old-style vendor hawking old-style technology such as ATM, while the stock market has been favoring native IP router vendors.
"I'm not into religious wars, I'm just into winning business," said Pearse Flynn, president and chief operating officer at Newbridge Networks, who will become president of a new carrier internetworking division.
"If you look at the big DSL service providers, such as Covad or New Edge, they're all building ATM networks, and we're seeing huge ATM tenders coming in," he said.
But the new division would also be developing its own next-generation products in the right timescale, said Flynn.
Flynn will report to Krish Prabhu, chief operating officer of Alcatel Telecom, who will oversee the integration process. According to Prabhu, "most customers have concluded that they'll have ATM in the backbone for the next five to 10 years." He added: "We're looking at dual backbones - one ATM and one IP. The challenge is to make sure the products mix and match as much as possible."
Yankee Group's Lewis agrees. "Everyone's talking about the shift to IP, but everybody is still, at least for the time being, buying ATM infrastructure to support that shift," he said.
On this view Alcatel looks well placed to provide a coherent migration towards next-generation networks for its carrier customers. And the first bits in the puzzle are already being prepared.
"We will be launching an optical network offering at the end of this year where we combine gigabit routing on top of optics," said Martin De Prycker, chief technology officer on Alcatel Telecom's executive committee.
'Dumb' network- This next-generation "dumb" core network architecture will involve network intelligence moving both up and down the protocol stack - down to a new optical networking layer that will switch lightwaves instead of data through the carrier network, and up to service provider end systems that will route IP through gigabit (and soon 10 gigabit) Ethernet interfaces to ride across the optical networks. Today's ATM and SDH/Sonet switching and transmission layers get stripped out, first in the core and then perhaps - maybe within a decade, according to De Prycker - even in the access network.
Until that happens, though, those middle layers will remain. And Alcatel is betting that its timeline for migration will prove the most accurate. |
