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Alcatel to Acquire Navini?

Light Reading
LR Mobile News Analysis
Light Reading
4/27/2004

Alcatel SA's (NYSE: ALA; Paris: CGEP:PA) OEM deal with startup Navini Networks Inc. has set industry tongues wagging over the possibility of the Gallic infrastructure giant launching an eventual acquisition bid for the Texan fixed-wireless vendor.

Last week Alcatel announced it is to rebadge Navini’s Riptide fixed wireless infrastructure kit for those customers unable to wait for industry ratified WiMax equipment (see Alcatel's Not Waiting for WiMax and Alcatel Signs Navini OEM). Alcatel was already an investor in Navini.

The deal is the latest sign of Alcatel’s desire to build out the wireless LAN and MAN areas of its product line, and adds to the company’s long list of OEM agreements (see Alcatel OEMs With Spatial, SpectraLink OEMs With Alcatel and Alcatel OEMs WaterCove).

But it’s the company’s history of turning OEM deals into outright acquisitions that has analysts mulling the prospect of a full-scale Navini purchase. Earlier this year Alcatel announced its acquisition of wireless router startup Watercove, following an OEM partnership announced just five months before (see Alcatel Swallows WaterCove).

“In light of Alcatel’s stated 802.16 interests and its OEM, then purchase of Watercove, competitors will begin to look for an Alcatel acquisition of Navini,” notes Current Analysis’s Peter Jarich.

Yankee Group senior analyst Lindsay Schroth argues that an acquisition “isn’t out of the realm of possibility,” but is unlikely to happen in the immediate future. “Navini needs to prove itself in the short term and get some of the deployments out there. It needs to prove that WiMax is capable of living up to the hype. Then it would become a clear acquisition target.”

Alcatel itself isn’t ruling out the possibility. “For the future, who knows? But it is not under discussion today,” comments Alberto Valsecchi, marketing director for the vendor’s wireless transmission division. “We are committed to providing a broadband experience to users, and as long as this agreement delivers this benefit to carriers and end users then there is no need to change the relationship.”

Gartner Inc.’s Jason Chapman cites yesterday’s handset deal with TCL Mobile Communication Co. Ltd. as a potential catalyst for future acquisition activity (see Alcatel, TCL Team on Handsets).

“Given that Alcatel has pulled back from the terminals business, the focus is very much on the equipment market where it is stronger," Chapman notes. "Moving forward, it might want to boost its equipment portfolio through acquisition or partnership. Given the success of the Fujitsu partnership in Evolium, Alcatel does have a proven track record in partnerships.” (See Alcatel Evolves Fujitsu Deal.)

— Justin Springham, Senior Editor, Europe, Unstrung

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