Alcatel-Lucent looking to sell enterprise business: report

Siemens/Gores is frontrunner to buy Alcatel-Lucent enterprise business, although Cisco, HP and Avaya could emerge

Alcatel-Lucent is reportedly shopping around its enterprise switching, IP telephony and contact center businesses in an effort to boost its financial performance by focusing on core telecom markets.

The unit could fetch up to $1.2 billion, and potential buyers include Cisco, HP, Avaya and private equity firms like the Gores Group, according to a story in Reuters. Alcatel-Lucent is meeting with prospective buyers in San Francisco this week, according to Reuters, which cited unnamed sources.

Alcatel-Lucent declined to comment.

LET'S MAKE A DEAL: Tech M&A deals of 2011

Reuters says the frontrunner in the talks is Siemens Enterprise Communications (SEN), which is 51% owned by Gores. SEN and Gores acquired enterprise switch maker Enterasys in 2008.

Alcatel-Lucent is looking to turn around flagging financials in the wake of a difficult merger between France's Alcatel and the U.S. telecom equipment company Lucent in 2006. Since then, the value of the combined company has decreased and Alcatel-Lucent has struggled financially.

Qatalyst Partners is advising Alcatel-Lucent on the sale, according to Reuters. Alcatel-Lucent has asked for indicative bids by early May and has requested cash offers, but the deadline could move around depending on the number of parties expressing interest, according to the report.

Any buyer would acquire a business that's been stagnant in Ethernet switching and IP telephony for many years. Alcatel-Lucent's share of the roughly $18.7 billion worldwide Ethernet switching market has been less than 1.5% for three years, according to Dell'Oro Group, placing them as the eighth or ninth leading vendor.

Cisco dominates that market with a 70% share, while HP is second with 10%.

Recently, Alcatel-Lucent has introduced some enterprise and data center switches which have impressed analysts in that market. The OmniSwitch 10000 is a 5Tbps core switch designed for 40/100G Ethernet support, and the OmniSwitch 6900 top-of-rack switch plays a pivotal role in Alcatel-Lucent's data center architecture.

In enterprise telephony, Alcatel-Lucent is fourth with an 8.9% share of the $12 billion market in 2010, according to Dell'Oro. But that's down from 9.9% in 2008, while leaders Avaya and Cisco and No. 5 NEC have gained share since then.

Siemens is No. 3 in telephony with a 10% share in 2010, down from 11.4% in 2008, according to Dell'Oro.

The growth engine in Alcatel-Lucent's enterprise business is its Genesys contact center software business, which accounts for 75% of the company's enterprise revenue, according to the Reuters story.

Learn more about this topic

Tech M&A deals of 2011

Alcatel-Lucent returns to profit, helped by data growth

Siemens enterprise, Enterasys in $550M joint venture

Join the discussion
Be the first to comment on this article. Our Commenting Policies