A friend in need is a friend indeed. This mantra seems to ring remarkably true at Alcatel-Lucent, evident by its wide reach and the position it finds itself in the telecom industry.
The telecom equipment maker fused a breadth of French and American experience together in the $14 billion merger between Alcatel and Lucent last December, and was further strengthened by its subsequent acquisition of Nortel Networks Ltd.’s 3G business. The former Alcatel had its stronghold in GSM and WiMAX technologies; the former Lucent Technologies in CDMA2000 and WCDMA; and Nortel’s 3G biz was centered around W-CDMA.
The combinations also brought overlapping resources, which prompted the company to begin eliminating 12,500 jobs over three years. Alcatel-Lucent now has about 79,000 employees with presence in at least 130 countries.
Alcatel-Lucent has struggled of late on Wall Street, having sent three profit warnings this year that downgraded revenue forecasts, and this summer announced the departure of two senior executives. Most of the remaining top leadership comes from Alcatel, with the exception of former Lucent CEO Patricia Russo, who is now head of the combined company.
Converged portfolio
Despite its growing pains, the company does not appear deterred by tightening profits and subsequent backlash from Wall Street.
Wireless “as a combined business group represents almost a third of the total top line for the company. So it’s a very, very large percentage of our business and represents a fairly equal spread around all the regions and the customers that we represent,” said Mary Chan, president of the company’s wireless business group.
“Within the former company, I think wireless always represented a fairly significant portion of investment,” she said. “What’s different about the new combined company is that I think we have a stronger combined wireline play-in a number of areas we’re No. 1-and we also have a very strong combined enterprise play as well.”
It’s that thickened mix of offerings that Alcatel-Lucent believes best positions it to provide an end-to-end converged solution to a wide sweep of customers.
“We can actually now couple multiple product lines on the wireline and wireless and really bring a true converged portfolio to our customers, and I think that we couldn’t do that before as separate companies,” Chan said. “The fact that you’re playing in multiple technologies gives you a better chance to balance it.”
The company’s range of offerings has helped it play well across the globe. “In the combined company at a total company level, we’re fairly evenly distributed,” Chan said. The business is split among North America, Europe (which includes Latin America) and the rest of the world.
“We are essentially riding the entire spectrum, if you will, from 2G to LTE. We’re seeing the whole spectrum of customers as they migrate and transform their networks from one stage to another,” Chief Marketing Officer Sandip Mukerjee said.
Alcatel-Lucent has made its biggest inroads in wireless in North America and Europe. The company doesn’t disclose details about its largest accounts and which carriers it does the most business with, but it doesn’t leave many stones unturned. “We do business with every one of the tier-one players,” Sandip said.
The company has hedged its bets across multiple technologies, leaving no standard behind as it pursues greater market share throughout the world.
“We have a very strong GSM business. If we look at the number of customers that we’re addressing with GSM, we have about 174 customers around the world in 90-plus countries. So it’s a very diversified portfolio,” Chan said.
Forward to the future
Alcatel-Lucent has made a calculated decision not to rest on legacy networks alone. Going forward the company remains bullish on emerging technologies such as WiMAX and LTE.
“I would argue, at least in terms of customer activity and customer contracts and deployments, we’re probably the leader in WiMAX right now. If we’re not the leader, we’re very close. We’ve got more than 70 pilots and trials and other deployments out there. We’ve got now 14 commercial contracts, certainly more announced commercial contracts than any other vendor,” said Kurt Steinert, senior manager of communications.
Still, in the not-so-distant future, Alcatel-Lucent sees things coming full circle.
“We believe, first of all, that the networks eventually over time are going to converge,” Chan said.
“The other thing we believe is that broadband wireless data is going to become ubiquitous and it’s going to be across many regions,” she added. “In the next three to four years, we’ll be reaching data rates at 100 megabits per second on a wireless network, and so therefore the way we envision that people utilize the network and how the service is going to get converged requires us to be playing in all these access technologies.”
Chan says the wireless industry is heading from data to more vibrant multimedia, leading to simultaneous delivery of voice and data.
“We see the world moving from a ‘Can you hear me now?’ paradigm to a ‘Can you see me now?’ paradigm,” Mukerjee said. “The whole social aspect and social dynamic of it gets built into our business. It’s just an exciting time in the industry.”
It’s what Chan calls “see-what-Isee” services. “It’s the service innovation that is really going to help differentiate some of these carriers,” she said. “It’s not about minutes of use anymore; it’s really about how that quality of service is going to attract more users onto that network. And that’s how the carriers are going to differentiate.”
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100 YEARS OF HISTORY
Alcatel dates back to 1898, when it began as CGE, a French-based industrial conglomerate with interests in electricity, transportation, electronics and telecom. CGE went on to produce the TGV highspeed trains in France, and it also became a leader in digital communications in the mid 1980s, changing its name to Alcatel Alsthom in 1983.
Lucent Technologies dates back to 1869, when it got its start as a small manufacturing firm in Cleveland. It went on to become the Western Electric Manufacturing Co. By 1880, it was the largest U.S. electrical manufacturing company. A year later, Alexander Graham Bell purchased a controlling interest in the company. In 1925, the company became Bell Telephone Laboratories, where it worked on the transistor, laser, solar-cell battery, digital signal processor chip and the concept of mobile telephone service as part of AT&T. Bell Labs researchers earned 11 Nobel Prizes. When AT&T divested its local Bell telephone companies in 1984, a new unit, AT&T Technologies, assumed multiple businesses that would eventually combine with Bell Labs to become Lucent. AT&T spun off the company in 1996.
