& cplSiteName &

How to Save Nokia Siemens's Optical Business

Craig Matsumoto
12/4/2012
50%
50%

What would it take to make the optical division of Nokia Networks into a viable standalone company?

Marlin Equity Partners , which announced on Monday that it's buying the division, says it wants to be a consolidator in the optical sector. But sources tapped by Light Reading aren't sure that's the best idea. (See NSN to Sell Optical Business.)

Suggestions that came up included creating a broader play for software-defined networking (SDN) in the metro, or simply flipping the business to Juniper Networks Inc. (NYSE: JNPR).

At the core of some observers' concerns is the weak state of optical networking. "There's growth in the sector, but it has to find a way to grow profitably," says Larry Schwerin, CEO of components and subsystems vendor Capella Photonics Inc.

Marlin vs. the big fish
Not that consolidation is a bad idea. The top optical-networking systems vendor tends to have about 20 percent market share, with a multitude of single-digit competitors trailing the top three or four. NSN is one such. Infonetics Research Inc. pins the NSN's optical revenues at about €400 million (US$522 million) for the year, good for 4 percent market share.

The consensus has been that consolidation is in order, and Schwerin, a former venture capitalist, has noted for a couple of years that private equity has been circling the sector. He's also expected to see a move toward vertical integration among optical companies. (See Can Vendors Build Their Optical Components?.)

If Marlin wants to combine NSN with other optical properties, it's already gotten a start. In October, the firm announced plans to acquire Sycamore Networks Inc. (Nasdaq: SCMR), adding $54 million in annual revenue, based on Sycamore's last four quarters.

That's still not exactly a powerhouse, and Schwerin isn't convinced that adding an optical components company would be that much help either. What could Marlin do, then?

Rather than pile NSN together with more optical companies, Marlin should combine it with metro packet technology, argues Tom Nolle, principal analyst with CIMI Corp. .

Nolle's idea is that Marlin, or anybody targeting metro networks, for that matter, should be melding packet and optical technologies under the same control software. Yes, that brings software-defined networking (SDN) into the discussion.

"If you buy nothing but optical and you don't look at this other direction of how you're going to integrate it into a metro strategy, you're buying parts that don't add up to a whole. You're amassing failure," Nolle says. "My question for Marlin is: Are they looking ahead far enough?"

No metro vendor is adequately pursuing the path of integrating packet and optical aggregation, Nolle claims. And he's picking on the metro space because it's the best telecom sector, business-wise ("There's metro networking, and there's networking that doesn't have a hope of being financially viable," he says) and because he believes SDN would be relatively simple to implement in a metro aggregation setting.

The idea that comes closest to Nolle's vision is the Open Transport Switch (OTS), an idea being proposed by Infinera Corp. (Nasdaq: INFN) and other vendors. (See Optical Transport Gets an SDN Idea and Optical SDN Gets a Test Run.)

Marlin the flipper?
Another possibility would be for Marlin to flip its new optical company to Juniper Networks Inc. (NYSE: JNPR), according to Dana Cooperson, an analyst with Ovum Ltd. .

She doesn't know if that's in Marlin's plans. It's just that NSN has been Juniper's optical partner for a long time, and by some reckoning, Juniper needs to consider owning some optical networking.

"Tying the packet and optical accounts together is something Cisco has been doing, something Alcatel-Lucent has been doing, and something Huawei has been doing," Cooperson says. "If Juniper wants to become a full-service vendor, they might want to do something like that."

She's got two questions to go along with that theory, though. The first is whether the sale to Marlin includes the optical portion of NSN's services, a substantial part of its business. (She guesses it would be, but Marlin and NSN haven't specified that yet.)

The second is the state of developmental technology inside NSN. The company showed an R&D glimmer in October, claiming a fiber-optic speed record based on spatial multiplexing technology. But NSN, despite still having a worthy staff, has been lacking in other areas, such as OTN, she says.

"It's not clear how much real in-house technology they have, because they made themselves into -- not quite but almost -- an outsourced, buy-off-the-shelf play," Cooperson says.

— Craig Matsumoto, Managing Editor, Light Reading

(7)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
TomNolle
50%
50%
TomNolle,
User Rank: Light Sabre
12/5/2012 | 5:16:37 PM
re: How to Save Nokia Siemens's Optical Business


Flipping the NSN optical unit to Juniper wouldn't make it a viable business.  Juniper would have to do something very strong to create an integrated metro-optical story based on SDN principles, just as much as Marlin would.  Since Juniper hasn't created that integration up to now even though NSN is a partner, and since it's also not integrated its own PTX with its own QFabric for a cloud story, could Juniper do the heavy lifting now?

TomNolle
50%
50%
TomNolle,
User Rank: Light Sabre
12/5/2012 | 5:16:30 PM
re: How to Save Nokia Siemens's Optical Business


I guess I'm having a hard time understanding your point here.  Let me break mine donw.  You can't create metro value by simply assembling a collection of stuff that others have offered.  The only way to add value today would be to conform to operator interest in harmonizing optical and lower-layer electrical forwarding in a single framework.  SDN just got tested by Infinera in that mode so it's not futuristic as a goal.


Do I want to discuss SDN?  Sure; I want to discuss what operators see as strategic.  In the past that was MPLS, and today it's SDN.  Time marches on, from the good old days to the current days to the (hopefully) good future days.

pluscachange
50%
50%
pluscachange,
User Rank: Light Beer
12/5/2012 | 5:16:30 PM
re: How to Save Nokia Siemens's Optical Business





"Rather than pile NSN together with more optical companies, Marlin should combine it with metro packet technology, argues Tom Nolle, principal analyst with CIMI Corp."


Come on Tom! Predicting the future's tough but the present should be easier even if it pays less;-) A quick look at their (had to say that) portfolio reveals the hiT7100. POTS - packet optical transport system/ packet optimised transport system - take your pick of TLA


"Nolle's idea is that Marlin, or anybody targeting metro networks, for that matter, should be melding packet and optical technologies under the same control software." I realise that Craig's quoting you but this is almost in the Al Gore and Internet fairytale realm. This particular idea goes back to bubble and has been worked on in IETF to give one example, for about a decade.  


"Yes, that brings software-defined networking (SDN) into the discussion."


Well what doesn't if that (SDN) is what you want to discuss? :-)  Kinda like MPLS in the good old days eh Tom?





 

TomNolle
50%
50%
TomNolle,
User Rank: Light Sabre
12/5/2012 | 5:16:29 PM
re: How to Save Nokia Siemens's Optical Business


We shall see on that I guess; having short-term goals doesn't guarantee short-term realization.

pluscachange
50%
50%
pluscachange,
User Rank: Light Beer
12/5/2012 | 5:16:29 PM
re: How to Save Nokia Siemens's Optical Business


Was it the 'gipper' who used to say 'there you go again'? I pointed out that they've already done the metro packety thing you recommend and back comes SDN and, somewhat gratuitously IMO, Infinera.


And, as we both know Tom, there's "strategic interest", "marketecture", "flavor of the month", "slideware"..........etc, you get the point. And reality. I know of one Tier 1 who was all over SDN and then very publically put a shot across its bows. It was covered here, by Ray I think.


So sure there's interest in SDN but I'm guessing Marlin are into more tangible assets. For SDN you need Merlin not Marlin.


 

obaut
50%
50%
obaut,
User Rank: Light Beer
12/5/2012 | 5:16:26 PM
re: How to Save Nokia Siemens's Optical Business


On how futuristic/strategic *software* defined networking is: Isn't it true that, when there's the alternative of clever architectural solution, best software is no software. Shouldn't we thus be looking toward *user/application/traffic* defined networking?

TomNolle
50%
50%
TomNolle,
User Rank: Light Sabre
12/5/2012 | 5:16:26 PM
re: How to Save Nokia Siemens's Optical Business


I think that any of those concepts would have to be defined to be assessed.  In any event you could argue that current adaptive networks are traffic-defined.  Operators seem to believe that they want less adaptive behavior; that's one of the principles of SDN.


I don't think the best software is no software; minimalism?

From The Founder
Either we perform a complete 'factory reset' on the way the telecom industry creates and deploys virtualization, or we face the consequences.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Huawei Video Resource Center
Mobile Operators & Video

4|25|17   |     |   (0) comments


Ovum's Ed Barton discusses the latest mobile operator strategies for mobile video.
LRTV Custom TV
Infinera Introduces Instant Network

4|20|17   |     |   (1) comment


Mike Capuano, vice president of marketing at Infinera, discusses the advancement from Instant Bandwidth to new Instant Network capabilities, which include Bandwidth License Pools, Moveable Licenses and Automated Capacity Engineering (ACE).
Women in Comms Introduction Videos
Vodafone's Eubank on Sponsors, Mentors & Moving On Up

4|19|17   |   4:25   |   (0) comments


Vodafone America's Head of Operations Kimberly Eubank breaks down the difference between a sponsor and a mentor and shares why both made a big difference in her career.
LRTV Custom TV
NYC Auto Show: Are We Smart Yet?

4|18|17   |     |   (0) comments


The auto industry is facing some big transformations as electric vehicles, autonomous technology and connected cars are seen as the future of the industry. During the much-anticipated NY international auto show, there was an emergence of new technology and mobility service on the show floor. Aside from performance, brands like Lincoln, Hyundai, Honda, Mercedes and ...
LRTV Huawei Video Resource Center
The Impact of Video

4|18|17   |     |   (0) comments


David Mercer from Strategy Analytics discusses the impact of video on current strategies.
LRTV Custom TV
Pardeep Kohli Discusses Network Transformation & the Market Opportunity for the 'New' Mavenir Systems

4|13|17   |     |   (0) comments


In a brief discussion at MWC 2017, Heavy Reading analyst Adi Kishore talks to Pardeep Kohli, CEO, Mavenir Systems about the creation of the 'new Mavenir' and some of the key challenges facing operators in today's market. A key theme of the discussion centers around operator need for software-only, virtualized solutions and how they will need to adapt to ...
Women in Comms Introduction Videos
Tech Maverick Shares Her Tips for Gender Inclusivity

4|12|17   |   7:28   |   (0) comments


Wendy Hall Bohling, a corporate escapee, author and gender exclusivity consultant, tells her story of sexism, bias and progress along the road to gender equality in the workforce.
LRTV Huawei Video Resource Center
Huawei at MWC 2017

4|11|17   |     |   (0) comments


At Mobile World Congress 2017, the biggest mobile industry gathering of the year, Huawei showcased its new innovations and solutions with the theme "Open Road," which focuses on cloud, 5G, operation transformation, videos and consumer-oriented products. Its campaign has been recognized by three awards given by GSMA.
LRTV Custom TV
China Telecom NFV Infrastructure on RSD

4|6|17   |     |   (0) comments


Lynn Comp, senior director of market development of Intel, is joined by Chong Zhang, storage engineer at Inspur and Ou Li Yan, architect for technology strategies of China Telecom, for a discussion of what NFV brings.
LRTV Custom TV
Nokia's IMPACT Software Demo

4|6|17   |     |   (0) comments


Khamis Abulgubein of IoT market development at Nokia demonstrates IMPACT (intelligent management platform for all connected things), a software solution with a horizontal approach to managing any device on any application.
LRTV Custom TV
Nokia Introduces Virtual Service Router for More Rapid Service

4|6|17   |     |   (0) comments


James Cumming, product line manager for virtualized service routers at Nokia, demonstrates how the virtual router based off the Nokia ecosystem changes the network function experience.
LRTV Custom TV
The Keys to SD-WAN Success

4|6|17   |     |   (0) comments


Versa Networks CEO Kelly Ahuja talks about the key requirements for service provider-managed SD-WANs.
Upcoming Live Events
May 15-17, 2017, Austin Convention Center, Austin, TX
May 15, 2017, Brazos Hall - Austin, TX
May 15, 2017, Austin Convention Center - Austin, TX
June 6, 2017, The Joule Hotel, Dallas, TX
All Upcoming Live Events
Infographics
With the mobile ecosystem becoming increasingly vulnerable to security threats, AdaptiveMobile has laid out some of the key considerations for the wireless community.
Hot Topics
Time for a Telecom Reboot
Steve Saunders, CEO and founder, Light Reading, 4/19/2017
Surprise! AT&T Markets 4G Advances as '5G Evolution'
Dan Jones, Mobile Editor, 4/25/2017
Did Verizon Outbid AT&T for Straight Path?
Dan Jones, Mobile Editor, 4/25/2017
First Year TIPs the Scale Toward Success
Denise Culver, 4/24/2017
Unlicensed: It's What's Next for US Mobile Operators
Dan Jones, Mobile Editor, 4/19/2017
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
One of the nice bits of my job (other than the teeny tiny salary, obviously) is that I get to pick and choose who I interview for this slot on the Light Reading home ...
TEOCO Founder and CEO Atul Jain talks to Light Reading Founder and CEO Steve Saunders about the challenges around cost control and service monetization in the mobile and IoT sectors.
Live Digital Audio

Playing it safe can only get you so far. Sometimes the biggest bets have the biggest payouts, and that is true in your career as well. For this radio show, Caroline Chan, general manager of the 5G Infrastructure Division of the Network Platform Group at Intel, will share her own personal story of how she successfully took big bets to build a successful career, as well as offer advice on how you can do the same. We’ll cover everything from how to overcome fear and manage risk, how to be prepared for where technology is going in the future and how to structure your career in a way to ensure you keep progressing. Chan, a seasoned telecom veteran and effective risk taker herself, will also leave plenty of time to answer all your questions live on the air.