& 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 Reading’s 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
Wednesday, September 14, 1:00PM EDT
What Is Agile?
Kent J. McDonald, Product Owner, Agile Alliance
UPCOMING COURSE SCHEDULE
Friday, September 16, 1:00PM EDT
How to Implement Agile
Alan Bateman, Director, Agile Transformation
Wednesday, September 21, 1:00PM EDT
What Is DevOps?
Colin Kincaid, CTO, Service Provider, Cisco
Friday, September 23, 1:00PM EDT
How to Implement DevOps
,
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.
Between the CEOs
CEO Chat: UXP Systems' Gemini Waghmare

8|26|16   |     |   (0) comments


Light Reading CEO Steve Saunders and UXP Systems CEO Gemini Waghmare discuss the strategic importance of digital identity for operators in the midst of transformation.
LRTV Custom TV
F5 Virtual Network Function Integrations With Partner Orchestration Platform

8|24|16   |   6:38   |   (0) comments


F5's Kishore Patnam, product manager for F5's service provider solutions, discusses why service providers are moving towards virtualization and how his clients are utilizing F5's solutions.
Between the CEOs
CEO Chat: Intel's Alexis Black Bjorlin

8|17|16   |   06:23   |   (0) comments


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.
Telecom Innovators Video Showcase
Accelerating Telecom Digital Transformation With Nominum DNS

8|1|16   |   12:04   |   (0) comments


Light Reading's Steve Saunders gets an update from Nominum CEO Gary Messiana on how his company is helping carriers on the digital transformation journey.
LRTV Custom TV
Reinventing Operations for a Virtual, Software-Defined World

7|28|16   |   5:23   |   (0) comments


Heavy Reading Senior Analyst Jim Hodges speaks with Accenture's Larry Socher and Matt Anderson about what service providers must do to transform their business to get the benefits of SDN and NFV including: leveraging DevOps, introducing real-time OSS and implementing analytics.
Women in Comms Introduction Videos
Fujitsu Sales Leader Shares Lessons Learned

7|27|16   |   5:12   |   (1) comment


As Fujitsu's only female sales leader, Annie Bogue knows the importance of asking for what you want, being flexible (she's been relocated five times), keeping a meticulous calendar, 'leaning in,' working harder than everyone else around you, being aware and more.
Telecom Innovators Video Showcase
VeEX Test & Measurement Solutions

7|25|16   |   08:57   |   (0) comments


Cyrille Morelle, president and CEO of VeEX Inc., talks test and measurement with Light Reading's Steve Saunders at BCE 2016. This includes innovative products such as VeSion Cloud-Based platform for network monitoring; MTTplus Modular Test platform for Access, Business, Carrier Ethernet, Transport and Core services; and OPX-BOX+ for Fiber Optics.
LRTV Custom TV
VeEX: Live From BCE 2016

7|25|16   |   03:20   |   (0) comments


VeEX's Senior Director of Business Development, Perry Romano, explains how VeEX provides tools to help install, maintain, monitor and manage network infrastructure efficiently and effectively. The portfolio of products on display include the RXT-6000, MTTplus and TX300s.
LRTV Custom TV
Real-Time Telemetry & Analytics for Intelligent SDN Orchestration

7|25|16   |   03:09   |   (0) comments


Packet Design CEO Scott Sherwood discusses how real-time network telemetry and analytics are enabling a new breed of SDN orchestration applications.
From the Founder
The Russo Report: Driving Disruption

7|25|16   |   07:44   |   (2) comments


In the first episode of a four-part series, Light Reading Founder and CEO Steve Saunders and Calix President and CEO Carl Russo drive around town discussing the disruptive mega-changes in the communications industry and where hope lies for service providers to meet the escalating demands of the cloud.
LRTV Custom TV
NetScout: Maximizing Enterprise Cloud for Digital Transformation

7|20|16   |   04:53   |   (0) comments


Light Reading Editor Mitch Wagner talks to NetScout CMO Jim McNiel about maximizing the benefits of enterprise cloud and digital transformation while minimizing potential pitfalls with a proper monitoring and instrumentation strategy.
Women in Comms Introduction Videos
Ciena's VP Offers a Career Crash Course

7|20|16   |   4:14   |   (2) comments


How did Ciena's Vice President of Sales, Angela Finn, carve out her career path? Simple, she tells WiC. She stayed true to her company, customers and principles. She shares her advice for women on how to be authentic and credible, as well as for companies that want to make a real change to their culture and practices.
Upcoming Live Events
September 13-14, 2016, The Curtis Hotel, Denver, CO
November 3, 2016, The Montcalm Marble Arch, London
November 30, 2016, The Westin Times Square, New York City
December 1, 2016, The Westin Times Square, New York, NY
December 6-8, 2016, The Westin Excelsior, Rome
May 16-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
Hot Topics
Cisco Developing 'Monica' Digital Assistant
Mitch Wagner, West Coast Bureau Chief, Light Reading, 8/22/2016
FirstNet: A Billion-Dollar Boondoggle?
Dan Jones, Mobile Editor, 8/26/2016
WiCipedia: Should Men Be Included? & Olympians Face Discrimination
Eryn Leavens, Special Features & Copy Editor, 8/26/2016
Google Fiber Can't Be Called a Failure
Carol Wilson, Editor-at-large, 8/26/2016
Google Fiber Downsizing Not Confirmed
Mari Silbey, Senior Editor, Cable/Video, 8/25/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Light Reading CEO Steve Saunders and UXP Systems CEO Gemini Waghmare discuss the strategic importance of digital identity for operators in the midst of transformation.
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.
Animals with Phones
Live Digital Audio

Bridging the tech skills gap is a major challenge for service providers and suppliers alike today – and the challenge is two-fold when it comes to increasing the number of women in the comms space. Level 3 Communications has made it a priority to overcome both challenges by implementing several unique programs focused on building the right candidates from within – in addition to filling the funnel by supporting STEM and other education programs. During this radio show, you’ll learn about these programs from Mary Beth McGrath, SVP of Global Talent Management at Level 3, and the best ways to bridge your own skills gap so that you are motivated and equipped for change. Plus you’ll have the chance to ask Mary Beth your questions live on the air.