& cplSiteName &

How to Save Nokia Siemens's Optical Business

Craig Matsumoto
News Analysis
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
Download our complete guide to de-risking NFV deployment in 2016, including:
  • An eight-step strategy to deploying NFV safely, based on input from the companies that have already started virtualizing their production networks.
  • Interviews with leading executives at Colt, AT&T, Deutsche Telekom, Cisco, Nokia, ZTE, Ericsson and Heavy Reading.
  • Flash Poll
    Live Streaming Video
    Prepping for the Future: Upskill U Explained
    During this short kick-off video, Doug Webster, Vice President of Service Provider Marketing, Cisco, and Light Reading’s CEO & Founder Steve Saunders give an overview of Upskill U.
    LRTV Interviews
    AT&T Expert on the Key Pillars of UC

    4|29|16   |   03:58   |   (0) comments


    Vishy Gopalakrishnan, AVP of product marketing at AT&T, talks about the three developments that are making unified communications and collaboration secure and reliable for enterprise users.
    LRTV Documentaries
    LRTV Report: Mobile Core Innovation

    4|28|16   |   25:32   |   (0) comments


    Hear from multiple industry experts from Deutsche Telekom, SK Telecom, Heavy Reading, Huawei, Cisco, Ericsson, Nokia, NEC and many more about developments in the mobile core as operators virtualize their IMS and evolved packet core systems and prepare for a 5G world.
    LRTV Huawei Video Resource Center
    NFV World Congress Highlight

    4|26|16   |     |   (0) comments


    The highlight of the NFV World Congress contains exciting telecom news. Join us for an inside look at Huawei's ICT 2020 plan and its latest collaboration with industry leaders.
    LRTV Interviews
    Unified Comms Finds Its Voice

    4|25|16   |   03:44   |   (0) comments


    Peter Quinlan, VP of UCC Product Management at Tata Communications, talks about the evolution of the unified communications and collaboration services sector and how voice is now a big part of current developments.
    LRTV Documentaries
    So... What Do We Do Now?

    4|25|16   |   03:24   |   (0) comments


    After a long hiatus, Max Dingman, the CEO of a GeeGhiz, returns for a motivational board room pep talk.
    LRTV Documentaries
    NAB 2016 Highlights

    4|21|16   |     |   (0) comments


    Light Reading's Cable/Video Practice Leader Alan Breznick climbs down from the slots to tell us about the latest news in broadcast technology at NAB 2016 in Las Vegas.
    Between the CEOs
    CEO Chat: Deepfield's Craig Labovitz

    4|21|16   |     |   (0) comments


    In this latest installment of the CEO Chat series, Craig Labovitz, co-founder and CEO of Deepfield, sits down with Light Reading's Steve Saunders in Light Reading's New York City office to discuss how Deepfield fits in with the big data trend and more.
    Shades of Ray
    Leading Lights 2016: Shortlists Announced

    4|20|16   |   0:53   |   (0) comments


    The judging is over and the Leading Lights 2016 shortlists have been published -- you can see who made the cut by clicking on this link.
    LRTV Custom TV
    Introducing MulteFire – Qualcomm at MWC 2016

    4|18|16   |   3.29   |   (0) comments


    MulteFire is the latest option for using LTE in unlicensed spectrum. As oppose to its close 'siblings', LAA and LTE-U, MulteFire operates solely in unlicensed spectrum, which enables it to offer the best of two worlds – LTE-like performance with WiFi-like deployment simplicity. In this interview, Sanjeev Athalye, Sr. Director, Product Management at Qualcomm ...
    Between the CEOs
    CEO Chat: Grant Van Rooyen of Cologix

    4|18|16   |     |   (0) comments


    Grant van Rooyen, president and CEO of Cologix, sits down with Steve Saunders, founder and CEO of Light Reading, in the vendor's New Jersey facility to offer an inside look at the company's success story and discuss the importance of security in the telecom industry.
    LRTV Huawei Video Resource Center
    ONS 2016 – Demonstration of Huawei's NetMatrix Multi-Vendor SDN Orchestrator

    4|15|16   |     |   (0) comments


    This demonstration shows how Huawei's NetMatrix SDN Orchestrator (SDN-O) addresses an operator's core service agility needs for services spanning multi-domain, multivendor networks: it includes a demonstration of:
    - Rapid New Service Design: using YANG to model a complex example of multi-domain, multivendor L3VPN network connectivity service that ...
    LRTV Custom TV
    AT&T Wants to Own North Carolina

    4|15|16   |     |   (1) comment


    Venessa Harrison, president of North Carolina for AT&T, tells how the company will expand its GigaPower service beyond the seven N.C. cities it already serves.

  • This blog, sponsored by AT&T, is the second part of a ten-part series examining next-generation broadband technologies titled "Behind the Speeds."
  • Upcoming Live Events
    May 23, 2016, Austin, TX
    May 23, 2016, Austin Convention Center
    May 24-25, 2016, Austin Convention Center, Austin, TX
    September 13-14, 2016, The Curtis Hotel, Denver, CO
    December 6-8, 2016,
    June 16-18, 2017, Austin Convention Center, Austin, TX
    All Upcoming Live Events
    Infographics
    A new survey conducted by Heavy Reading and TM Forum shows that CSPs around the world see the move to digital operations as a necessary part of their overall virtualization strategies.
    Hot Topics
    Ultra-Broadband Summit, Hong Kong
    Iain Morris, News Editor, 4/27/2016
    WiCipedia: Woman Cards & Bitch Switches
    Sarah Thomas, Director, Women in Comms, 4/29/2016
    FCC Poised to Re-Regulate Wholesale Access
    Carol Wilson, Editor-at-large, 4/28/2016
    Mitel Asks: What Time of Day Do You Shower?
    Mitch Wagner, West Coast Bureau Chief, Light Reading, 4/25/2016
    GoT Fans Curse HBO (Not Right) Now
    Mari Silbey, Senior Editor, Cable/Video, 4/25/2016
    Like Us on Facebook
    Twitter Feed
    BETWEEN THE CEOs - Executive Interviews
    In this latest installment of the CEO Chat series, Craig Labovitz, co-founder and CEO of Deepfield, sits down with Light Reading's Steve Saunders in Light Reading's New York City office to discuss how Deepfield fits in with the big data trend and more.
    Grant van Rooyen, president and CEO of Cologix, sits down with Steve Saunders, founder and CEO of Light Reading, in the vendor's New Jersey facility to offer an inside look at the company's success story and discuss the importance of security in the telecom industry.
    Animals with Phones
    Live Digital Audio

    Of all the tech companies in the Valley, Intel has made the most aggressive commitment to building a diverse and inclusive workplace culture. It's doing so by taking concrete, measurable steps, making a large financial investment and through a commitment to complete transparency about its progress. In this radio show, WiC Director Sarah Thomas will be joined by Shlomit Weiss, Intel's Vice President, Data Center Group, and General Manager of Networking Engineering, who will share with us why Intel is tackling this huge challenge, how and to what effect. She will also discuss her unique experiences leading development of Client SOC development in the past and today leading development of all of the chipmaker's silicon hardware for networking IPs and discrete devices and managing a team of 600 engineers across Israel, Europe and the US.