Light Reading

AlcaLu in Talks to Sell Security Unit to Thales

Sarah Thomas
5/22/2014
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Alcatel-Lucent is currently in exclusive negotiations with Thales to sell off its network security business to the defense giant.

Alcatel-Lucent said Thursday that it was looking to form a strategic partnership with Thales SA (Paris: TCFP.PA) in which they would provide their combined cyber security and communications security services to their customers. Alcatel-Lucent (NYSE: ALU) would also continue to develop new "advanced security features for its portfolio of IP and ultra-broadband access products," the company said in a release on the proposed deal.

Cyber security was a cornerstone of Alcatel-Lucent's Shift Plan, unveiled last year, and the company believes that by divesting to Thales it will be able to offer customers an end-to-end network security platform that combines its network knowledge with Thales's defense services. (See Alcatel-Lucent Unveils Shift Plan and Alcatel-Lucent Builds Future Around IP.)

The deal isn't official yet, as the two companies work out the terms of the deal, but this isn't the first tie-up between the pair. Alcatel-Lucent previously had a 20.8% stake in Thales that it sold off in 2008 as part of its effort to divest non-core assets. It had transferred its space assets to Thales in 2007 after Alcatel and Lucent merged. (See AlcaLu to Sell Thales and AlcaLu Seals Asset Sale Deal.)

This is the third of several planned partnerships that AlcaLu is forming under the Shift Plan. In February it sold a small stake of its small-cell business to Qualcomm Inc. (Nasdaq: QCOM) and struck a deal with Intel Corp. (Nasdaq: INTC) focused on cloud. (See Alcatel-Lucent CEO: We Can Go It Alone and Joint Qualcomm & AlcaLu Small Cells Due Mid-Year.)

"Alcatel-Lucent needs a significant play in network security to be competitive with where Nokia is already at and where Ericsson is clearly going now," Heavy Reading security analyst Patrick Donegan tells us. "This looks like it, albeit the devil will be in the details when they are discussed in briefings in the coming days."

In the meantime, check out the Show Site for Light Reading's Mobile Network Security Summit, which took place in London yesterday, for more on the state of mobile network security today. (See Slide Show: Mobile Network Security Strategies London.)

— Sarah Reedy, Senior Editor, Light Reading

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SachinEE
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SachinEE,
User Rank: Light Sabre
5/31/2014 | 2:00:30 PM
Re: outsourcing security
@pdonegan67-I agree with the fact that ALU does not stand any chance of being competitive when it comes to the end to end network security space. I also think that the only way through which you can give ALU something that is more compelling is by selling out and allowing Thales to incorporate the ALU capabilities into their portfolio. I also agree with the fact that even though they may not own it, they will sell something that is much more compelling than what they normally offer.
SReedy
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SReedy,
User Rank: Blogger
5/27/2014 | 1:23:56 PM
Re: outsourcing security
Good point, Mark. ALU acquired Kindsight in April 2013, so that is likely part of it.
MarkC73
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MarkC73,
User Rank: Light Sabre
5/27/2014 | 11:19:06 AM
Re: outsourcing security
Thanks Sarah!  The Arbor partnership seemed to be an integration of IDS/IPS between Arbor's probes and the ISA MDA, which is a card in ALu's routers that can do specialized functions.  Kindsight, I can't recall if they were owned by ALu or not, but that's probably whats on the table.
SReedy
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SReedy,
User Rank: Blogger
5/27/2014 | 9:42:19 AM
Re: outsourcing security
A deal hasn't been struck yet, so I think it's all under discussion. We'll hopefully hear more official news in the coming days, but the division include its cyber-security and network security assets.
MarkC73
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MarkC73,
User Rank: Light Sabre
5/27/2014 | 3:03:40 AM
Re: outsourcing security
Specifically, do you know what this will do to the overall SROS strategy?  I was only familiar with ALu's partnership with Arbor and its pitch with Kindsight Security Labs.  Do you know how or what is being sold?  I'm going to assume what their plan to expand security visibility into their NMS (5620 SAM) is still on the table.  But their other partnerships might be what are being revamped
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
5/23/2014 | 1:50:08 PM
Re: outsourcing security
pdonegan67 - I see your point, but AlcaLu needs to do a better job articulating its message. 

As of now, it looks like a major mixed message. 
pdonegan67
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pdonegan67,
User Rank: Light Sabre
5/23/2014 | 11:35:22 AM
Re: outsourcing security
Yes I imagine those T&Cs are under discussion as we speak.
SReedy
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SReedy,
User Rank: Blogger
5/23/2014 | 11:33:24 AM
Re: outsourcing security
Thanks, Patrick. That makes sense, although there must have to be some level of exclusivity to the deal, otherwise Thales could offer that end-to-end benefit to other vendors as well.
pdonegan67
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pdonegan67,
User Rank: Light Sabre
5/23/2014 | 2:29:09 AM
Re: outsourcing security
I think the rationale goes something like this. Solo, with what they have internally, ALU stands next to no chance of being competitive in the end to end network security space.

By selling out, allowing Thales to integrate the ALU capabilities into their portfolio, and then positioning the bigger end to end Thales-owned story, ALU will have something a lot more compelling. They won't own it (to your point) but what they will have to sell will be (a lot) more compelling than what they currently have.

That looks like the rationale but it's difficult to verify that since it turns out they're not hosting briefings as the negotations are only now getting underway.
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
5/22/2014 | 7:25:57 PM
Re: outsourcing security
I was thinking the same thing, Sarah. How does selling their security division make AlcaLu more serious about security, either in appearance or actuality?
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