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AlcaLu's Router Run Continues

Craig Matsumoto
8/28/2007

Alcatel-Lucent (NYSE: ALU) might have had a disappointing earnings report, but market researchers say the company had a heck of a second quarter on the product front.

Specifically, Ovum RHK Inc. tallied the company's IP/MPLS revenues -- via the TiMetra acquisition, essentially -- at $274 million, up 60 percent from the previous year. And the Dell'Oro Group Group recently came to a similar finding, reporting Alcatel had passed Juniper Networks Inc. (NYSE: JNPR) for second place in the service provider edge router market, with both companies trailing Cisco Systems Inc. (Nasdaq: CSCO), of course.

Dell'Oro showed Alcatel-Lucent growing 85 percent from the previous year's second quarter, compared with Juniper's growth of 23 percent.

(On an interesting side note, Dell'Oro calculates Huawei Technologies Co. Ltd. climbed into fourth place in edge routers, with a second quarter that was 95 percent bigger than last year's.)

The numbers, alongside a top market share in optical for the quarter, give Alcatel-Lucent something to cheer about, following a second-quarter earnings report that showed continued struggles in the mobile segment and a disappointingly low gross margin of around 33 percent. (See Optical Shines in Q2 and Alcatel-Lucent Slumps on Q2 Loss .)

In a report issued last week, analyst Simon Leopold of Morgan Keegan & Company Inc. wrote that the router and optical numbers are "encouraging," calling them trends that "are overlooked as investors focus instead on restructuring issues and near-term product transitions that provide drag on margins."

What's Juniper think of being bumped to No. 3, though? Juniper had no official comment, but it's been hearing that song, in various forms, for a couple of years now. A spokesman pointed out that rankings can fluctuate from quarter to quarter; moreover, the rankings depend on which products are being counted. (See Alcatel Router Revenues Surge.)

Juniper still ranks a clear No. 2 in IP transport, says Mark Seery, an analyst with Ovum-RHK. But he says what's hurt the company on the IP/MPLS edge is its lack of a carrier Ethernet product, since the Ethernet and edge-router markets are so linked.

Juniper is fighting back with the MX960, launched last year to address just this kind of concern. (See Juniper Antes Up on Ethernet (Finally).) The product is just starting to gain revenues, and Seery thinks it will take some "continued evolution" of the product for Juniper to gain steam.

To regain edge market share could take Juniper one to three years, Seery says, assuming no surprises from Cisco, or some smaller player, upend Alcatel-Lucent's or Juniper's plans.

— Craig Matsumoto, West Coast Editor, Light Reading

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Pete Baldwin
Pete Baldwin
12/5/2012 | 3:03:27 PM
re: AlcaLu's Router Run Continues
The article's about Alcatel, really, but there's something to be said for Juniper's product push during the past year or so. Wall Street seems a lot happier with the company these days. We'll probably do a follow-up story on that.
delphi
delphi
12/5/2012 | 3:03:26 PM
re: AlcaLu's Router Run Continues
The real analysis should include new carriers vs. carriers already commited; and then overall foot print. Sales growth is not embedded footprint.

Then look at margins. What is the free cash flow?

Finally, look at Al Gore's "win" and see how stats lie.

There was a great press release decades age where in the old Soviets finished second and the US was next to last. It was a two team competition.

Footprint matters, new wins are important, free cash flow determines the winners.

Alcatel's margins says it all.
desiEngineer
desiEngineer
12/5/2012 | 3:03:25 PM
re: AlcaLu's Router Run Continues
delphi: Footprint matters, new wins are important, free cash flow determines the winners.

Hah! Oldest trick in the book. Trolling for sales/revenue/growth info with a fire-someone-to-righteous-indignation post.

Clearly, you're delphi, the auto parts maker, not someone co-located with the Oracle :-)

-desi
tmc1
tmc1
12/5/2012 | 3:03:25 PM
re: AlcaLu's Router Run Continues
Delphi,

You act as a current or former ALU insider yet your information is inaccurate and downright wrong. As it was previously during the Quigley thread:

http://www.lightreading.com/bo...


The facts are clear that TiMetra/IPD is one of the most profitable and highest growth BUs within ALU. The customer footprint is still growing much to your dismay along with the revenue.

You may not like it but to quote LRs distinguished editor (Phil H): "you can suck it"

http://www.lightreading.com/bo...

Mark Seery
Mark Seery
12/5/2012 | 3:03:25 PM
re: AlcaLu's Router Run Continues
>> To regain edge market share could take Juniper one to three years, Seery says <<

Just to put a little bit more precision on this:

"Therefore a change in positions over the next year is not the most likely scenario, but over a period of 1 to 3 years it is plausible depending of course on how Alcatel-Lucent responds to a more competitive Juniper. Of course scenarios involving the role Cisco will play in the market share of both Alcatel-Lucent and Juniper have to be considered as well, as do the role that smaller players today may play if they become more competitive on a global basis."

Obviously in any given quarter someone could be flat and the someone else could be up, but over a rolling four quarter basis to get back to the number two position, for all uses of IP/MPLS technology (notably Ethernet over PW/MPLS), will take sustained and significant growth, or sustained and significant decline by the competition.
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