The company says it will drop the 7770 OBX core router product and combine its features with TiMetra products

September 29, 2003

4 Min Read
Alcatel Redraws Router Strategy

Alcatel SA (NYSE: ALA; Paris: CGEP:PA) officials confirmed today that the company has ceased development of its 7770 Optical Broadband Exchange (OBX) core IP router. It will now focus its research and development efforts on a new set of routers it acquired from startup TiMetra.

"We will not continue to develop any further extensions for the 7770," says Tim Krause, vice president of marketing for the fixed communication group, which includes solutions in data, optical transport, broadband access, and next-generation switching to carriers. "We aren't cancelling the product line, but the roadmap for further development has been stopped."No formal announcement has been issued from Alcatel on the change in strategy, but last week an executive from the company let it slip during a briefing with analysts and investors in New York. Stephen Kamman, an analyst with CIBC World Markets, published a research note on the news.

On Friday, a spokesperson denied the shift in strategy. But today, in an interview with Light Reading, Krause confirmed the changes.

He says that after the acquisition of TiMetra this summer, Alcatel decided to scrap further development of the 7770, concentrating future efforts on the existing TiMetra product line (see Alcatel & TiMetra Seal the Deal). The TiMetra platform, which has been re-branded the 7750 Service Router (SR), is specifically engineered to deliver IP services like Layer 2 and Layer 3 virtual private networks (VPNs) over an IP/MPLS backbone (see TiMetra Shoots for Service Edge).

“When you bring in a new technology stream, the existing road map has to be adapted and changed,” Krause says. “From the beginning, we said we would be taking advantage of the new technology and expertise that came from TiMetra.”

While the 7750 is clearly targeted for the edge of a service provider network, Krause claims that the change in strategy does not mean the company is abandoning the core IP router market. He says that the company plans to enhance the 7750 with features from the 7770, including nonstop routing, which improves IP reliability, and IPv6 (see IP Routing Gets a Restart).

Krause says the company will continue to support the installed base of 7770 OBX core routers, which includes deployments at China Netcom Corp. Ltd., and a number of research networks in Europe including ATRIUM, a pan-European network, BELNET, the Belgian national research network, and CERN, the European Organization for Nuclear Research. He also denies that the company is actively looking to acquire a core IP routing company to fill any sort of product hole.

Adapting the 7750 into a core router may not be too difficult. The largest box in the series, previously known as the SR-12, offers 10 usable slots with 200 Gbit/s worth of capacity in one third of a telecom rack. The platform is also designed to be programmable, so Krause says that Alcatel will be able to add the necessary features to the box.

It’s difficult to say whether this strategy will actually work. The company has already spent a lot of time and money developing and promoting the 7770 OBX (see Alcatel Bids for IP Core). To a certain degree, it has been successful. According to a recent report from Heavy Reading, Light Reading’s market research arm, the company scored high in terms of market recognition in a recent carrier survey (see Core Blimey! ).

But actual market share figures tell a different story. According to Infonetics Research Inc., the 7770 has consistently accounted for only about 1 percent of the total core router market for the past several quarters. In the second quarter of 2003, it improved its ranking by 1 percent point, bringing it up to 2 percent of the total market. Cisco Systems Inc. (Nasdaq: CSCO) and Juniper Networks Inc. (Nasdaq: JNPR) still dominate, with a combined market share over 94 percent, says Infonetics.

Krause explains that the IP services market is first developing at the edge, which explains the company’s focus there. Kevin Mitchell, an analyst with Infonetics, agrees that the company has a better chance of cracking the edge router market. The company has already started winning some business with the products. Masergy Communications Inc. announced back in June that it was using the TiMetra gear to roll out its Layer 2 Ehternet-based VPLS service (see Masergy Launches VPLS Service).

“The addressable market at the edge is bigger than the core right now,” Mitchell says. “And it’s also where a lot of the innovation is happening. Other companies are finding success here and it’s crowded, but it might be a better opportunity right now.”

— Marguerite Reardon, Senior Editor, Light Reading

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