AlcaLu Keeps Up Router Ambitions
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.)
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