All eyes on Alcatel-Lucent merger

Alcatel-based enterprises in wait-and-see mode after Lucent merger.


With the mega-merger of Lucent and Alcatel in the books, corporate users of Alcatel voice and data gear say the deal could be a boon for the French vendor's market presence in the United States.

In addition to merging a plethora of carrier access, edge, backbone and optical product lines, the Alcatel-Lucent merger creates an interesting package of IP voice, switching, routing and security products. But with Lucent mostly out of the enterprise business since 2000, and Alcatel's scant market share, some observers question whether the merger will be just a blip on the screen for large IT buyers.

Lucent and Alcatel agreed last week to a $13.4 billion merger, in which Lucent CEO Patricia Russo would become the head of the joined company. But the deal - called a merger of equals - is essentially a buyout of Lucent by Alcatel, which has almost twice the market value of its U.S. rival.

"The Lucent footprint could help Alcatel a little in the U.S., but it's not like Lucent is that well known to U.S. enterprises either," says Zeus Kerravala, an analyst with The Yankee Group. "The Lucent brand has been gone from the enterprise for so long, it might not give Alcatel much of a boost."

If a company is going to go through a process and end up picking Alcatel, Kerravala says, "it's going to be because the [buyer] has done their due diligence and found some feature or benefit from Alcatel," and not because of name recognition or marketing.

Price and performance are the reasons users would install Alcatel gear in the United States.

"I'm just waiting with interest to see what's going to happen" to Alcatel's enterprise business after the merger, says David Happala, network technician for the Crosby Independent School District, which is near Houston.

Three years ago, the school district standardized on Alcatel OmniSwitch Layer 3 Gigabit Ethernet backbone and 10/100/1000Mbps wiring closet switches, when Happala was looking to build a district-wide Gigabit Ethernet WAN with fiber provided by the local cable TV provider.

"I liked what Alcatel was doing at the time with Layer 3 and Layer 4 switching," Happala says. "Cisco was doing it too, but it was too expensive. When we put our requirements out for bid, Alcatel came in at one-third of the cost of the Cisco bid."

Lucent for years was a well-known corporate brand, with its Definity PBX and Cajun line of LAN switches, but the vendor spun off all product lines with the divestiture of Avaya in 2000. (Avaya has since stopped selling data products).

In a Webcast news conference in Paris last week, Alcatel Chairman Serge Tchuruk and Lucent CEO Russo only briefly mentioned enterprise customers in reference to the two companies' work on developing IMS technology, which defines how IP networks handle voice calls and data sessions, and next-generation all-IP networks.

Their remarks were aimed mostly at network operator customers, especially big companies requiring global support.

Alcatel spokesman Mark Burnworth said it was still too early to delve into any details, such as which product lines could be expanded or dropped.

Whether or not a merged Alcatel-Lucent divests its enterprise gear, some users think the Lucent brand still holds weight.

"I think it will be beneficial," having Lucent and Alcatel merged, says Michael Robinson, director of communications for Jackson State University in Jackson, Miss. The university uses Alcatel OmniSwitch LAN switches and the OmniPCX Enterprise IP PBX phone system, which provides analog phone service to dormitories, and a mix of digital and IP voice to staff and faculty office.

Corporate offerings A combined Alcatel-Lucent would have an almost complete package of enterprise voice, data and security gear.
Alcatel OmniPCX Enterprise: Hybrid IP/TDM PBX with Session Initiation Protocol support.
Alcatel OmniSwitch: Stackable and chassis-based Layer 2 to 4 LAN switches, scaling up to 10G Ethernet.
Alcatel OmniAccess: WAN routers with T-1/T-3 and VPN support.
Lucent VPN Firewall Brick: Layer 2 firewall/VPN/QoS appliance.
Lucent Security Management Server: VPN and QoS provisioning platform.
Lucent IPSec Client: Remote access software.

"The main thing it will give Alcatel is more name recognition here in the U.S.," Robinson says of the Alcatel-Lucent merger. "Alcatel has very good products, but not many people out there have purchased Alcatel equipment or even know where to get it." In Mississippi, only one telecom/datacom integrator offers Alcatel products, Robinson says.

Also at issue with the Alcatel-Lucent merger are the vendors' relationships with the French and U.S. governments, respectively. Both vendors sell gear to their federal governments and support it, and a merged company could raise issues with the governments, analysts say.

"[Lucent] said they would create a proxy board in charge of sorting out government business by degree of sensitivity," says Stéphane Téral, an analyst with Infonetics Research.

Alcatel also has defense-related business with the French government that is being divested of and merged into EADS, the French airplane and IT outsourcing giant.

Material from the IDG News Service was used in this report.

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