With the right moves, more large enterprise wins for Alcatel could be in the cards

Alcatel’s large voice and data win at the University of Pittsburgh Medical Center could be a sign of more U.S. enterprise-market momentum, depending on how the French vendor’s merger with Lucent plays out.

Lucent and Alcatel shareholders approved the proposed $13.4 billion merger in September, but the deal still faces scrutiny from the U.S. House Armed Services Committee because the merger of Lucent (which has strong U.S. defense ties) with the French vendor Alcatel is a concern to some officials.

All the news and controversy that have been kicked up around Alcatel this year have obscured the fact that the company has some strong enterprise LAN, WAN and security products, industry observers say.

“The products in Alcatel’s enterprise division are actually pretty good.” says Steven Schuchart, an analyst with Current Analysis. “But their ability to penetrate the North American market has been somewhat limited.”

Brand recognition always has been Alcatel’s downfall in North America, Schuchart says. “A lot of times, it’s not a rejection of Alcatel’s approach, strategy or products,” he says. “It’s that Alcatel is not even invited to the party,” when enterprise network buyers look to compare products on paper or in a lab.

Its anticipated Lucent merger aside, Alcatel as a whole has been on a roll in its key markets over the last year, nearly doubling its IP-routing product revenues in its third fiscal quarter (which ended Oct. 24) compared to the same time in 2005. Alcatel also has become a legitimate threat to Cisco in certain router markets, such as carrier edge aggregation, recently surpassing Juniper to take second place.

In enterprise switching, however, Alcatel has seen some modest success. Its $41.1 million in second-quarter 2006 LAN switch revenue was up 16% from the previous year, although it accounted for only about 1.1% of the $3.8 billion in marketwide revenue during the quarter.

An enterprise-focused push with the Lucent brand as an entrée for U.S. IT customers potentially could give the company’s enterprise data business a boost.

“The Lucent name is much more well-known in North American and resonates with enterprises,” Schuchart says. “Alcatel does not have much stature with enterprise customers.” For enterprise customers who regard vendor viability and stability highly,

Alcatel — a $16.6 billion company in terms of market capitalization — might not be a bad bet, Schuchart says. “When you compare them to smaller network vendors, such as 3Com, Foundry or Extreme, you can’t doubt Alcatel’s cash fortitude,” he says.