Light Reading

How Will Ciena + Ericsson Play Out?

Ray Le Maistre
2/14/2014
50%
50%

So Ciena and Ericsson have fallen into each other's arms and are whispering sweet nothings about packet-optical transport and software-defined networking (SDN) into each other's ears. (See Ciena, Ericsson Embark on SDN, Optical Love Affair.)

But might this relationship start as a global partnership and end with wedding bells? Could we be talking about Ciericcson or Ericiena in a few years' time? (Obviously, if ever these two did merge, you would have to imagine that common sense would prevail and a decent name would be found. Stranger things have happened though...)

As you can imagine, the topic of potential M&A activity between the new partners is not something that Ciena Corp. (NYSE: CIEN) and Ericsson AB (Nasdaq: ERIC) are going to discuss, but it's obvious that even if it hasn't been tabled as an official agenda item at their partnership meetings, it will have been on everyone's minds, even if only as a fleeting possibility.

And why not? The global vendor market will inevitably shrink further as margins get squeezed in the infrastructure markets and as competition arrives in the SDN and network functions virtualization (NFV) world from IT firms that are not traditionally players in the telecom space. So consolidation is a given. It's a case of which companies will join forces and which will die.

For any mergers to make sense, there will need to be a sensible combination of products and services and an amiable cultural fit.

If you take a look at their core strengths, a marriage of the two vendors would seem to make sense on paper. Ericsson has the full set of mobile infrastructure offerings (radio access, packet core, IP routing), global services and Service Provider Information Technology (SPIT) systems (OSS, BSS, policy, IMS etc), while Ciena has an impressive lineup of optical and Carrier Ethernet capabilities.

But does Ericsson need a Ciena? Well, a number of Ericsson's main rivals have strong optical businesses: Alcatel-Lucent (NYSE: ALU), Cisco Systems Inc. (Nasdaq: CSCO) and Huawei Technologies Co. Ltd. spring most readily to mind. And while Ericsson does have an optical transport portfolio, it's far from being in the leading pack. So from a competitive point of view, strengthening the transport part of its business would be a good move.

Why? Because it's an increasingly critical part of the portfolio: Let's not forget that as SDN, NFV and telco datacenters become the de facto elements in any communications service provider (CSP) arsenal, the quality and reliability of the transport network becomes even more essential to the successful delivery of services and applications, and therefore, ultimately, a positive customer experience.

As for the cultural side of things, it's always hard to know how well (or badly) two companies might mix. For me, the only way to find out if the respective CEOs -- Ciena's Gary Smith and Ericsson's Hans Vestberg -- could help deliver a united, harmonious merged company is by setting an example from the top would be to send them out on a karaoke evening, and see what happens. Could they choose appropriate songs for each other? Would one hog the microphone? I'd be prepared to join them to find out -- maybe they'd both be free during Mobile World Congress to take a late night trip to Barcelona's Manchester Bar in the old town, sink a few cerveza and crank up the volume. I'm sure their PAs will let me know if they're free.

You Know You Want To!!
Come on Gary, Hans... it could be fun, right?
Come on Gary, Hans... it could be fun, right?

So if this Valentine's Day relationship blossoms into an engagement and ultimately a marriage (shotgun or otherwise), don't be surprised. The next year or so will see if they are suitable bedfellows.

And don't even get me started on whether Nokia Networks and Juniper Networks Inc. (NYSE: JNPR) should be more than just close friends…

— Ray Le Maistre, Editor-in-Chief, Light Reading

(4)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
R Clark
50%
50%
R Clark,
User Rank: Blogger
2/16/2014 | 10:38:49 PM
Heading for the altar
I think Ray's analysis is right that the parties must be seriously contemplating a merger, but it all gets down to the chemistry.

These marketing partnerships often get into trouble because of the lack of clarity and corporate politics, especially if there are competing products.
sterlingperrin
100%
0%
sterlingperrin,
User Rank: Lightning
2/14/2014 | 3:22:51 PM
Re: overlap
I understand that the MLH 3000 is weak and the Ciena products would be clearly preferred. But I view the SPO 1400 as a pretty strong product in packet-optical transport and don't see Ciena's packet-optical as a clear winner (they are both strong) - this may be the point you make about MPLS-TP.

Still, from what I've gathered it looks like Ericsson has indeed placed both MLH 3000 and SPO in the legacy/maintenance bucket. If that's not true, they need to clarify...

 

Sterling
mfaisalk
100%
0%
mfaisalk,
User Rank: Lightning
2/14/2014 | 2:25:58 PM
overlap
There is one part of the transport where there is an overlap with Ercisson certainly has strength in their product compared to Ceina i.e MPLS-TP. So I do not agree with the assumption that Ciena has a clear leadership when it comes to " carrier ethernet portfolio". However when it comes to the DWDM/OTN part, Ciena clearly is way ahead of Ericsson. So lets see how this global agreement unfolds. To me , it is more of a strategy aimed at unifying the SDN direction of the two. Just my two cents....
PaulERainford
50%
50%
PaulERainford,
User Rank: Light Sabre
2/14/2014 | 10:17:15 AM
Man in Black
That's a superior karaoke session you've got there - the bloke on the left is Johnny Cash, unless I'm much mistaken. Any Cash classics appropriate to cable empire-building? 'One Piece at a Time' maybe?
More Blogs from Shades of Ray
The results from tests undertaken by EANTC of Cisco service provider virtualization software show that the New IP world is very much here.
Thursday February 26, 2015 will stand out in the US communications calendar as an historic day following the reclassification of broadband and imposition of net neutrality rules.
JDSU channels the spirit of the Roman Empire as it announces its post-split optical and assurance units will be called Lumentum and Viavi.
It's Deutsche Telekom's Capital Markets day on February 26 & 27, and I'm expecting some big news around its SDN and NFV strategy.
Are you all strapped in? Then let's talk 5G, NFV, IoT, security and anything else that rhymes with LTE… oh, and tapas…
Flash Poll
From The Founder
The New IP is actually bigger even than business. Like another hugely important tech that Light Reading is digging into right now, the New IP has the potential to change the world by fundamentally advancing what it is possible for people to achieve with communications.
Que Sera Sarah
Growth of the 5G Ecosystem

3|6|15   |   1:15   |   (1) comment


Use cases and industry collaborations dominated 5G discussions during Mobile World Congress 2015. For what the road to 5G means for operators and their partners, head to the Building America's 5G Ecosystem event in New York on April 14.
LRTV Custom TV
Sonus NaaS IQ Real-Time Demo

3|6|15   |   4:03   |   (0) comments


Compass Networks Chairman and CEO Matt Bross and Ray Dolin, CEO of Sonus Networks, demonstrate their Sonus IQ SDN solution using a live video conference connection.
LRTV Custom TV
LRTV Talks Carrier WiFi & WiFi Calling With Aptilo Networks

3|6|15   |   4:53   |   (0) comments


We stopped by Aptilo Networks, a market leader in WiFi service management and offloading, to discuss the new possibilities with next-generation WiFi calling and why WiFi should be a natural part of any operator strategy.
LRTV Interviews
NGMN Chairman Outlines His 5G Vision

3|6|15   |   5:10   |   (1) comment


Bruno Jacobfeuerborn, chairman of the NGMN Alliance and Deutsche Telekom CTO, shares his thoughts on the challenges, opportunities and costs of 5G.
LRTV Interviews
In the Cloud With Telecom Italia

3|5|15   |   7:10   |   (0) comments


Light Reading CEO Steve Saunders sits down with Telecom Italia's Simone Battiferri at Mobile World Congress to discuss virtualization, agility and the economic advantages of the cloud.
LRTV Huawei Video Resource Center
New Ways of Working

3|5|15   |   4:24   |   (0) comments


At the ICT Leaders Roundtable, hosted jointly by Light Reading and Huawei at the Hotel Renaissance in Barcelona just prior to Mobile World Congress, Hong Kong Telecom's Michael Yue explains how the transformation in its business has changed its customer relationships.
LRTV Huawei Video Resource Center
Bridging the Digital Gap

3|5|15   |   4:03   |   (0) comments


At the ICT Leaders Roundtable, hosted jointly by Light Reading and Huawei at the Hotel Renaissance in Barcelona just prior to Mobile World Congress, Boingo's Dr. Derek Peterson explains how ICT can help telcos bring the physical and virtual worlds closer together.
LRTV Huawei Video Resource Center
Making the Internet of Things Affordable

3|5|15   |   2:42   |   (0) comments


At the ICT Leaders Roundtable, hosted jointly by Light Reading and Huawei at the Hotel Renaissance in Barcelona just prior to Mobile World Congress, Telefonica's Dr. Mike Short explains how the Internet of Things demands a new low-cost approach to connectivity from telcos.
LRTV Huawei Video Resource Center
Evolution, Not Revolution

3|5|15   |   2:00   |   (0) comments


At the ICT Leaders Roundtable, hosted jointly by Light Reading and Huawei at the Hotel Renaissance in Barcelona just prior to Mobile World Congress, Heavy Reading's Patrick Donegan explains why telcos can't be too hasty in their efforts to transform themselves.
LRTV Custom TV
Management & Orchestration Enablement Strategies Required for NFV Commercial Success

3|5|15   |   6:22   |   (0) comments


NFV commercial success rests on successful service orchestration strategies which can span heterogeneous physical, virtual, legacy and next-gen networks. Network data and security integrity are additional key aspects. Nakina provides a suite of orchestratable network integrity applications built on an open, scalable MANO enablement platform.
LRTV Huawei Video Resource Center
The Power of Five Convergences in OceanStor OS

3|4|15   |   6:24   |   (0) comments


OceanStor OS is Huawei's brand-new storage operating system. While inheriting the consistent high stability, reliability and performance from the company's previous storage products, OceanStor OS abounds in new converged storage features. Specifically, the new storage operating system achieves "five convergences" to lift storage convergence to a higher level.
LRTV Huawei Video Resource Center
4K Brings Extreme Video Experience

3|4|15   |   8:10   |   (0) comments


4K video is a hot topic in the video industry. It will certainly bring an extreme video experience to end users. At the same time, however, it will also pose a big challenge to operators. Check out this Huawei 4K experts' discussion about how operators can achieve success in 4K video service.
Upcoming Live Events
March 17, 2015, The Cable Center, Denver, CO
April 14, 2015, The Westin Times Square, New York City, NY
May 12, 2015, Grand Hyatt, Denver, CO
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 8, 2015, Chicago, IL
June 9-10, 2015, Chicago, IL
June 9, 2015, Chicago, IL
June 10, 2015, Chicago, IL
All Upcoming Live Events
Infographics
Net neutrality, broadband services and the current outlook on data consumption, as presented by the New Jersey Institute of Technology.
Hot Topics
Internet Pioneers Decry Title II Rules
Carol Wilson, Editor-at-large, 3/2/2015
Wheeler: We'll Enforce Title II 'Case-By-Case'
Sarah Thomas, Editorial Operations Director, 3/3/2015
New CenturyLink CTO in Major Overhaul
Carol Wilson, Editor-at-large, 3/4/2015
Alibaba 'Planting a Flag' in US Cloud Market
Mitch Wagner, West Coast Bureau Chief, Light Reading, 3/4/2015
Few in Number, Big in Data
Sarah Thomas, Editorial Operations Director, 3/2/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Chattanooga’s EPB publicly owned utility comms company has become a poster child for how to enable a local economy using next-gen networking technology. Steve Saunders, Founder of Light Reading, sits down with Harold DePriest, president and CEO of EPB, to learn how EPB is bringing big time tech to small town America.
Light Reading CEO Steve Saunders talks transformation and virtualization – including Light Reading's independent testing of the vendor's virtualization solutions – with Cisco CEO John Chambers at Mobile World Congress in Barcelona.
Check out Light Reading's interview with Jay Samit, the newly appointed CEO of publicly traded SeaChange International Inc. With a resume that includes Sony, EMI, and Universal, Samit brings a reputation as an entrepreneur and a disruptor to his new role at the video solutions company. Hear what he had to say about the opportunities in video, as well as the outlook for cable, telco, OTT and mobile service providers.
G'day! And welcome to an entirely new feature on Light Reading -- our weekly "CEO-to-CEO" interview.