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AlcaLu Keeps Up Router Ambitions

Craig Matsumoto
2/23/2010

Alcatel-Lucent (NYSE: ALU) is pointing to recent market statistics to say its ascent in the router market continued even in a down year.

AlcaLu is making a big deal out of that, primarily using Dell'Oro Group stats to claim it was the only vendor of the big three -- the others being Cisco Systems Inc. (Nasdaq: CSCO) and Juniper Networks Inc. (NYSE: JNPR) -- that saw increased revenues and market share in 2009. (See AlcaLu Trumpets Market Share.)

Alcatel-Lucent's surge, driven by the 7450 Ethernet Service Switch and the 7750 Service Router, was noticed in 2005, when it first started contending with Juniper for the No. 2 spot in edge routing. (See Alcatel Router Revenues Surge.) AlcaLu took advantage of competitors' product gaps around that time -- Juniper lacked an Ethernet switch, for instance -- but Juniper has managed to overcome that disparity, and Cisco is putting no small effort into revitalizing its edge routers.

Dell'Oro analyst Shin Umeda says AlcaLu's market share in edge routing went up to 20 percent from 15 percent the previous year. ACG Research analyst Ray Mota puts Juniper in second place for overall service provider routers, with 20 percent share compared with AlcaLu's 17 percent. But in edge routers, Alcatel-Lucent holds about 23 percent share, with Juniper at 19 percent.

The recent gains seem to be coming at the expense of Cisco, which has seen market share shaved away in recent quarters, particularly in Carrier Ethernet. (See AlcaLu Trumpets Market Share and Competition Erodes Cisco’s CESR Lead.)

AlcaLu executives say their success has come from a focus on delivering services in general, as opposed to obsessing about video. "There's a difference between transporting video as an over-the-top service and delivering IPTV as a managed service," says Lindsay Newell, vice president of marketing. "It's not just about lowest-cost transport."

But another factor is that AlcaLu's 7450 Ethernet Service Switch and 7750 Service Router have sold into a relatively narrow band.

"Alcatel-Lucent plays almost exclusively in the Carrier Ethernet part of the market, and that fared much better, not only for Alcatel but for Juniper as well," says Dell'Oro's Umeda. "They're playing in the one part of the routing market that's stable." (Dell'Oro's numbers say Carrier Ethernet sales were flat in 2009 compared with 2008, while other switch/router markets saw declines.)

AlcaLu also knows how to pick its targets. "They're cranking away at a lot of these Tier 2s out there," ACG's Mota says. AlcaLu's briefings frequently highlight wins with European and Asian carriers that aren't so familiar to American ears -- a win announced today with Pannon GSM Rt. , the Telenor Group (Nasdaq: TELN) mobile operation in Hungary, comes to mind. (See AlcaLu Wins in Hungary.)

Getting edgy
Juniper has managed to respond strongly by riding the same Carrier Ethernet wave.

"Juniper did very well with their MX portfolio and had strong growth year-over-year," Umeda says.

Juniper also points out that the MX line has plenty of services smarts. "We know customers like the MX and the edge portfolio we have because of services," says Wendy Cartee, Juniper's vice president of product marketing.

Cisco's edge-network strategy will ride on the ASR 9000 and an emphasis on video transport, as the company confirmed in an email to Light Reading.

Now that it's been in some customers' hands for about a year, the ASR 9000 "should start to turn into some meaningful business for Cisco," Umeda says. "Even by Cisco's own admission, they had some holes in their product line, and it's taken some time to fill them."

As competition at the edge increases, Alcatel-Lucent will be trying to expand the 7750's reach into mobile networks and into the core. The former case will include matching the routers and switches with AlcaLu's wireless portfolio to build an all-in-one case for operators. AlcaLu, like anybody else selling Ethernet gear, also expects to get lots of business in backhaul networks.

The core networking side would be an interesting direction, if the 7750 can pull it off. The box has been deployed as a core router in some small networks, but with 100-Gbit/s interfaces due to arrive later this year, Alcatel-Lucent hopes to become more of a force in the core. It's already gotten a win with Qwest Communications International Inc. (NYSE: Q) to show for its efforts. (See AlcaLu Scores Core 100G Win.)

"I think 2010 is a year when many of the decisions about next-generation core selection will happen," Newell says. "Qwest, obviously, is the first major success we've had there, ahead of delivering the 100 Gbit/s."

"I'm really interested to see how well that goes," says Mota. "It'll say whether this FP2 chip that they're talking about could scale or not. The second half of this year will determine how they do in the core space."

— Craig Matsumoto, West Coast Editor, Light Reading

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Fiber Lord
Fiber Lord
12/5/2012 | 4:42:15 PM
re: AlcaLu Keeps Up Router Ambitions


Dell'Oro continues to use its magic number generator when it comes to analyzing markets. Huawei overtook ALU in market share and revenue two years ago, and is likely at par with Juniper. Huawei continues to take market share from all the others.


Let's pretend they do not exist. Click your heels together three times and say"There's no place called China. There's no place called China, There's no place called China."


Wishing and hoping and dreaming will not make it so. ALU is no longer leader in DSL and continues to play the fantasy game in routers.

Fiber Lord
Fiber Lord
12/5/2012 | 4:42:14 PM
re: AlcaLu Keeps Up Router Ambitions


Stefan: I think you're agreeing with me, which is good. It is better than the usual justification of such outlandish claims that "the Chinese always lie so we cut their reported numbers in half."


 


I think NSN, Ericsson and Huawei will lead in wireless. The thing I wish would happen is that these organizations would learn to adapt and compete. Ericsson does well with its services and its "build, deploy, operate model." Huawei gives the customer what they want. They listen to the customer and do not act arrogantly and are not  massively overstaffed with overpaid personnel.


 


Alcatel and Lucent were both doing poorly in the market. They figured that if they merged that the market would be distracted. How's that strategy working out for them?

Stefan Sip
Stefan Sip
12/5/2012 | 4:42:14 PM
re: AlcaLu Keeps Up Router Ambitions


Let's face it, the bias is rampant in every form and shape.  In 2009, Huawei grew 18% over 2008.  Let me add the LR caveat that "Huawei's numbers are not yet audited so we can't really trust them".  But compared to its peers of Ericsson, ALU, and NSN, it grew net/net 28% to 36% since its peers shrank anywhere from 10% to 18% in the same time period.  So if 2010 plays out the same way 2004 to 2009 has, then the distance between Huawei and Ericsson will be a fuzzy line and the distance between Huawei and ALU/NSN will be considerable.  The game is over, regardless of what ALU and others claim.


ALU's final hopes are LTE and routers.  LTE is clearly going to slow down from the hype and no huge contracts are forthcoming in 2010 that can be a game changers for ALU.  On the router side, ALU has to muscle Cisco and Juniper on the "high end" and compete against Huawei Euro for Euro on the low/med-end products and operators.  Once again, no easy task. 


The macro trend is clear, there will only be Ericsson and Huawei in wireless, each commanding 40% of the market, while the rest fight for the rest.  In wireline, Huawei will continue to dominate, with ALU a strong contender, but with a steady erosion of market share.


So Fiber Lord, statistics can lie because people put those statistics together.


 

mountainwest
mountainwest
12/5/2012 | 4:42:12 PM
re: AlcaLu Keeps Up Router Ambitions


there is no way to confirm this statement utill they tell the truth, isn't it? and what is your ground this statement is not true? we all want to hear.


- mountainwest

Fiber Lord
Fiber Lord
12/5/2012 | 4:42:11 PM
re: AlcaLu Keeps Up Router Ambitions


Mountainwest: I am not certain what it is exactly that you are taking exception to. If you ask Dell'Oro analysts why their reported numbers are different than the ones audited by KPMG the analysts will say pretty much what I just wrote, that the Chinese always lie so you cut them in half.


 


Now, if you're asking why Dell'Oro feels that half is the right discount to be applied to the numbers that Chinese vendors have reported, I think you'll have to ask them.


But, Huawei is present everywhere, including now North America. Their customers China Mobile and China Telecom are so much bigger than any other service provider in the world in either the wireless or wireline space, Huawei is being exposed to design problems well in advance of the other vendors.


 


These vendors remind me of the Caliph of Baghdad, who when told of the approaching Mongol army of Hulugu said that no one would dare attack him as he had enough soldiers to bail out the oceans. The mongols trampled him to death.


You would have thought that the demise of the arrogant Nortel, ("we're Canadian we do everything better"), would have woken up Alcatel-Lucent.

Fiber Lord
Fiber Lord
12/5/2012 | 4:42:10 PM
re: AlcaLu Keeps Up Router Ambitions


Mountainwest: It is hard for me to understand what your point is the way you phrase things. Huawei was mentioned by me in my first comment because they are bigger than ALU and I think the same size as Juniper, yet the original article was written as if they did not exist. Why did Dell'Oro leave them out of their analysis? I would look up the definition of "shill" if I were you.


 


Say, you're not Bobby Maxx are you?

mountainwest
mountainwest
12/5/2012 | 4:42:10 PM
re: AlcaLu Keeps Up Router Ambitions


Huawei is not in the context of this article. Since you brought it up, you probably the best one to check with Dell'Oro to find out why.


Huawei is benefit from the Hugh Chinese market mainly because of the Chinese protectionism policy, there is no doubt about it. But saying those Chinese service providers are "so much bigger than any other service provider in the world in either the wireless or wireline space", it may be a little bit exaggerate, unless they are lying when filling the SEC document, but it is not their expertise to lower the revenue number of course. 


The Mongol story is very touching, just wondering where the Mongol is now? otherwise it may be a good lesson sent over to the Senator to discuss.


For the falling of Nortel, you may give or they may take too much credit for it.


 


-mountianwest


 

desiEngineer
desiEngineer
12/5/2012 | 4:42:09 PM
re: AlcaLu Keeps Up Router Ambitions


Fiber Lord: This is a very specific comparison Dell'Oro is making - IP/MPLS edge routing - like the Quidway NE80 or NE5000.  Whether Huawei is bigger than ALU or not in this space is the issue.  Don't bring in DSLAMs, optical, wireless, etc. and muddy the discussion.  That is a topic that we can discuss on a different thread, and really has no relevance to this article.  As an example, just because Juniper's edge routing market share is greater than Ericsson's is not automatic cause to assume Juniper is a larger company than Ericsson.


So, before you dismiss the report as hogwash, please clarify this.  Is your contention that Huawei's edge routing revenue exceeds ALU and Juniper?  Where do you think their revenue stands?  It would be interesting to see that figure. Let's ignore those "bigoted analysts" who halve the numbers provided by Huawei.


If you want to compare telecom companies, then you can talk of Ericsson and NSN.  But in the edge router space, Ericsson just blends with the noise, despite some early success with Redback (in the pre-acquisition, maybe even pre-burst-bubble period).


-desi


PS. One of you British types with the classical Latin education should come up with a term for pre-bubble burst, like antediluvian.

Fiber Lord
Fiber Lord
12/5/2012 | 4:42:09 PM
re: AlcaLu Keeps Up Router Ambitions


Desi: The NE5000E and NE80E are Core routers, comparing well to the CRS-1 and the 12000 XR, they are not edge routers, although the NE80 is an edge router.


To fill you in, the 4Q09 revenue for IP MPLS routers from Huawei was north of $500 Million and ALU in its 4Q09 PR said its IP business was $429 Million and Juniper's was alittle less than $570 M.

Fiber Lord
Fiber Lord
12/5/2012 | 4:42:04 PM
re: AlcaLu Keeps Up Router Ambitions


I give you that there is difficulty directly comparing numbers, but let's make sure we treat all vendors the same. Firstly, the Chinese government will not be buying service providers routers, the service providers will. If we bring in Chinese government involvement lets talk about federal sales by the other vendors as well, and if the thought is that the service providers are nurtured by the Chinese government lets keep in mind that that is standard practice in most countries where all of these vendors sell, and remember the American broadband stimulus.


The goal of my first posting was to point out that the analyst community seems to have learned nothing from the RHK fiasco. Hyping fantasy does not make it reality.


My other pet peeve is the hyping of the economic viability of FTTH by the analyst community as well. That rant will have to wait for another time.

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