& cplSiteName &

NSN to Sell Optical Business

Ray Le Maistre
12/3/2012
50%
50%

Nokia Networks has agreed to sell its Optical Networks business to Marlin Equity Partners, the private equity firm that recently announced plans to buy what was left of Sycamore Networks Inc. (Nasdaq: SCMR). (See Sycamore Prepares to Shut Down.)

No financial terms were disclosed. Once the deal is concluded, which is expected to happen in early 2013, about 1,900 NSN staff, most of whom are based in China, Germany and Portugal, will transfer to Marlin. The private equity firm is creating a new optical systems company, based in Munich, with NSN's current head of optical, Herbert Merz, as the CEO.

The divestment includes NSN's 100Gbit/s coherent platform, the hiT 7300, and its packet-optical switch, the hiT 7100, plus a number of network management and planning tools. NSN claims to have more than 200 optical transport systems customers. (See XO Deploys First Nationwide 100G Network, XO's Not Done Yet With 100G, NSN Makes Optical Advances and Euronews: NSN Lands 100G Deal.)

The deal does not include NSN's Carrier Ethernet assets, for which a separate divestment deal is being sought. (See Can NSN Offload Its Carrier Ethernet Assets?)

NSN has already sold a number of technology assets, including its microwave backhaul, WiMax, fixed access broadband and IPTV product lines, and is still seeking buyers for others parts of the business. (See Is NSN Close to BSS Sale? and M&A Interest in NSN's BSS Assets Builds.)

Marlin intends to form a new optical equipment company around the new acquisition and buy more assets: It says it "intends to act as a consolidator, building an industry leader in the fragmented optical networking sector."

That sector, which generates sales of around US$15 billion a year currently, has been in decline this year, according to Ovum Ltd. . The current market leaders, according to Infonetics Research Inc. , are Huawei Technologies Co. Ltd. , Ciena Corp. (NYSE: CIEN) and Alcatel-Lucent (NYSE: ALU). (See Ovum: Optical Networking Market Shrinks Again.)

Why this matters
This is a significant move for NSN, which had not identified its optical business as "non-core" when it unveiled its new strategy a year ago. In fact, NSN pinned its future on a broad mobile broadband-focused market strategy, dubbed Liquid Net, that included Liquid Transport as a key element. (See NSN Hangs Its Future on the Liquid Net.)

But NSN is still a company struggling for financial stability and this deal should bring in some cash and, perhaps more importantly, reduce its operating cost base beyond its initial targets, as the 1,900 staff that will come off its payroll are in addition to the 17,000 jobs NSN is shedding as part of its restructuring process.

That cost-cutting process is already having an impact on NSN's profitability, so the vendor's parents, Nokia Corp. (NYSE: NOK) and Siemens AG (NYSE: SI; Frankfurt: SIE), will likely see this asset sale as a positive. (See APAC Boosts NSN's Q3.)

An NSN spokesman tells Light Reading that "transport is important" but that the company could now narrow its technology focus on the radio access network (RAN), mobile core and customer experience management (CEM). Once the divestment is complete, NSN will "work with best-of-breed partners" and integrate third-party technology with its remaining mobile broadband products using its Service Provider Information Technology (SPIT) tools (NetAct and configuration software) in the same way it already does with routers and microwave backhaul systems.

For the optical transport sector, this deal signals something of a shake-up, as Marlin clearly intends to look for further assets to buy to give it greater scale. The private equity firm is also intent on building a broader portfolio for the telecom sector as it recently acquired Openwave Messaging Inc. and Openwave Mobility Inc. (See Openwave Goes Private and Unwired Planet Sells Units to Marlin.)

For more on NSN's transformation



— Ray Le Maistre, International Managing Editor, Light Reading

(10)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
digits
50%
50%
digits,
User Rank: Light Beer
12/5/2012 | 5:16:44 PM
re: NSN to Sell Optical Business


Marlin Equity must have a cunning plan up its sleeve.... or maybe it doesn't mind the thin margins that optical attracts these days.


Depending on what sort of cash NSN is getting -- remember, it gave Adtran money to take the fixed broadband business off it shands -- this looks like quite a smatr move, allowing it to be even more focused and reducing its opex further.


By the end of 2013 this should be helping NSN's margins.

Brunonero
50%
50%
Brunonero,
User Rank: Light Beer
12/5/2012 | 5:16:43 PM
re: NSN to Sell Optical Business


...and NSN's gross margins were already the industry's highest in Q3.  


In order of next best performers in Q3, gross margin and operating margin/profit:


NSN        GM=32.2%  OP=9.2%;


Ericsson  GM=30.4%  OP=6.7%;


Alu         GM=27.9%  OP=-5%  (negative OP);


ZTE        GM=17%     OP=-16% (negative OP).

paolo.franzoi
50%
50%
paolo.franzoi,
User Rank: Light Beer
12/5/2012 | 5:16:43 PM
re: NSN to Sell Optical Business


Bruno,


Left Cisco off that list...


seven


 

macster
50%
50%
macster,
User Rank: Light Bulb
12/5/2012 | 5:16:42 PM
re: NSN to Sell Optical Business


NSN + E/// = 1 company? In 2013?


Taking bets now..... 3:1 odds.

Pete Baldwin
50%
50%
Pete Baldwin,
User Rank: Light Beer
12/5/2012 | 5:16:41 PM
re: NSN to Sell Optical Business


Tom Nolle of CIMI Corp. says NSN now must acquire cloud-services technology. 


The company has forced its own hand, he says: "The question is whether it realizes that once you leave the transport layer you have nowhere to go except the service layer."


http://blog.cimicorp.com/?p=1026


His broader thesis is that equipment vendors are headed into the same space as the likes of Amazon, Apple and Google.


Thoughts?

Pete Baldwin
50%
50%
Pete Baldwin,
User Rank: Light Beer
12/5/2012 | 5:16:41 PM
re: NSN to Sell Optical Business


You mean a deal completed in 2013, or a deal simply announced in 2013?  Could be a big difference...

macster
50%
50%
macster,
User Rank: Light Bulb
12/5/2012 | 5:16:40 PM
re: NSN to Sell Optical Business


I agree with some of Tom's points.


But..... can you really see NSN doing any acquisition? Or is it more likely that they will get acquired?


P.S. Would you like the odds on NSN doing any acquisition in 2013? :)

macster
50%
50%
macster,
User Rank: Light Bulb
12/5/2012 | 5:16:40 PM
re: NSN to Sell Optical Business


Announced. I think people will want waaayyyyyyyy greater odds for 'completed' :)

macster
50%
50%
macster,
User Rank: Light Bulb
12/5/2012 | 5:16:39 PM
re: NSN to Sell Optical Business


On a more serious note:


From Tom's blog, operator revenue is not merely 'capped'. I see it decreasing in the coming years. There's only so much you can do to reduce network cost (though other aspects of 'costs' like customer acquisition costs, e.g. subsidies have yet to be really looked at). You need new avenues of top-line growth, as Tom alluded (OTT).


I remain skeptical. In another article, Ray commented and asked if Virgin's WiFi networks would help operators with the mobile data issue. In the UK (and Europe), people tend to be indoors and play with their smartphones, consuming bandwidth indoors (on WiFi). Does this not actually shift revenue away from mobile? I've not heard a compelling plan from any operator, on how they intend to grow revenue.

amitawal
50%
50%
amitawal,
User Rank: Light Beer
12/5/2012 | 5:16:38 PM
re: NSN to Sell Optical Business


Would be good to see someone workout the math, compare Nortel's sell price and guess NSNs !!

Light Readingís Upskill U is a FREE, interactive, online educational resource that delivers must-have education on themes that relate to the overall business transformation taking place in the communications industry.
NEXT COURSE
Friday, December 2, 1:00PM EST
The SDN Approach to IP & Optical Integration
Sterling Perrin, Senior Analyst, Heavy Reading
in association with:
From The Founder
Light Reading today starts a new voyage as part of a larger Enterprise.
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.
Women in Comms Introduction Videos
Korn Ferry Consultant: How to Find, Cultivate & Be the Best Talent

11|30|16   |   4:10   |   (1) comment


Erin Callaghan, a managing consultant for Korn Ferry Futurestep, shares strategies for companies to improve how they recruit and for women to ensure they don't get lost in the pipeline.
LRTV Custom TV
We Can Make the World More Sustainable

11|29|16   |     |   (0) comments


GeSI is a global e-Sustainability Initiative organization bringing together 40 big multinational companies around the world. According to GeSI's report, information and communication technology can make the world more sustainable. Luis Neves, chairman of GeSI, shared with us his opinion at Ultra-broadband Forum (UBBF2016).
LRTV Custom TV
Finding a New Way to Engage Customers & Drive Revenue

11|29|16   |     |   (0) comments


Mobile revenues are declining. Digicel, a player in the Caribbean telecommunications/entertainment space, has found a new way to engage customers and drive revenue. John Quinn, CTO of Digicel, shared with us its story at Ultra-broadband Forum (UBBF2016)
LRTV Custom TV
Do You Really Need Gigabit Infrastructure?

11|29|16   |     |   (0) comments


Altibox is the biggest fiber-to-the-home (FTTH) player and the largest provider of video and TV in Norway. They started out with zero customers in 2002. Now they have close to half a million households and companies attached to their FTTH business. Nils Arne, CEO of Altibox shared with us their story and insight on 5G at Ultra-broadband Forum (UBBF2016).
LRTV Custom TV
BTís Openreach Strategy & Its Updates in 2016

11|29|16   |     |   (0) comments


A lot of developments at Openreach this year in terms of strategy and planned investments. Peter Bell, CIO of Openreach BT, shared with us the updates of Openreach at Ultra-broadband Forum (UBBF2016).
LRTV Custom TV
ITU: The Broadband Is Our Future

11|29|16   |     |   (0) comments


At Ultra-broadband Forum, Houlin Zhao, Secretary General of ITU, discussed how important it is for countries, companies and everybody to be working together to help to build the broadband and digital economies (UBBF2016).
LRTV Custom TV
Tackling 5G in Dallas

11|28|16   |     |   (0) comments


Here are our highlights of the 5G North America show in Dallas, Texas with Light Reading's Dan Jones.
LRTV Interviews
Cox Prepping for Virtualization Trials

11|14|16   |     |   (0) comments


In this video interview, Cox's Jeff Finkelstein discusses MSO's plans to test managed business services in early 2017 and tackle Distributed Access Architectures.
LRTV Custom TV
Drivers & Potential of NGP

11|11|16   |     |   (0) comments


ETSI has created an Industry Specification Group to work on Next Generation Protocols (NGP ISG), looking at evolving communications and networking protocols to provide the scale, security, mobility and ease of deployment required for the connected society of the 21st century. The NGP ISG will identify the requirements for next generation protocols and network ...
LRTV Custom TV
Huawei IP 2020 for Future Networks

11|11|16   |     |   (0) comments


Future Networks should satisfy many requirements such as high throughput, extremely low latency, flexible mobility, intrinsic security, networking automation, and so forth. The Chief Architect of Huawei Future Networks addresses a holistic solution, i.e., IP 2020, to achieve these requirements for various future life scenarios (e.g., autonomous driving, tactile ...
LRTV Custom TV
Digital Object Architecture

11|11|16   |     |   (0) comments


Digital Object Architecture provides a basic information infrastructure that can facilitate interoperability between or among different systems, processes, and other information resources, including different identity management systems. Digital objects are networked objects that are named by digital object identifiers and instantiated by an infrastructure service ...
LRTV Custom TV
BT's Openreach Has High Hopes for Long-Reach VDSL

11|11|16   |   06:04   |   (0) comments


Peter Bell, Network Portfolio CIO at BT's access business Openreach, talks about the operator's trial of a new broadband access technology called Long Reach VDSL.
Upcoming Live Events
December 6-8, 2016, The Westin Excelsior, Rome
May 16-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
Hot Topics
AT&T Debuts DirecTV Now on New Video Platform
Mari Silbey, Senior Editor, Cable/Video, 11/28/2016
Apple Seeds 5G? Seeks 'Multi-Gigabit' Chip Designer
Dan Jones, Mobile Editor, 11/30/2016
Altice Plans FTTH for Entire US Footprint
Iain Morris, News Editor, 11/30/2016
Altice FTTH Bill Could Hit Almost $9.6B in US
Iain Morris, News Editor, 12/1/2016
Samsung Bows to Investors, Considers Revamp
Iain Morris, News Editor, 11/29/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Eyal Waldman, CEO of Mellanox Technologies, speaks to Steve Saunders, CEO of Light Reading, for an exclusive interview about the 100 GB cable challenge, cybersecurity and much more.
Join us for an in-depth interview between Steve Saunders of Light Reading and Alexis Black Bjorlin of Intel as they discuss the release of the company's Silicon Photonics platform, its performance, long-term prospects, customer expectations and much more.
Live Digital Audio

Even when there's a strong pipeline of female talent in the comms industry, it tends to leak all the way to the top. McKinsey & Company says women experience pipeline leakage at three primary points: being unable to enter, being stuck in the middle or being locked out of the top. Each pipeline pain point presents its own challenges, but also opportunities to stop the leak. Wireless operator Sprint is making a conscious effort to improve its own pipeline from new recruits to the C-suite, and it wants the rest of the industry to do the same. In this Women in Comms radio show, WiC Board Member and Sprint Vice President of Enterprise Sales Nelly Pitocco will give us her take on the industry's pipeline challenges. Pitocco, who joined Sprint in May and has spent 20 years in the comms industry, will also offer solutions, share how Sprint is tackling the challenge within its own organization and take your questions live on air.