Alcatel Router Revenues Surge

(NYSE: ALA; Paris: CGEP:PA) has some numbers to back up the success it's claiming in edge routing, as the company plans to announce today that its market share surged in the third quarter.

Figures from Synergy Research Group Inc. show Alcatel's 7750 and 7450 models collected $88.8 million in revenues during the third quarter, up from roughly $35 million in the second quarter.

Yes, sales more than doubled in three months.

"That shocked a lot of people," says Ray Mota, the Synergy analyst behind the report. Mota queried some major carriers, though, and he says they're backing up the numbers.

"It's not a spike," asserts Basil Alwan, president of Alcatel's IP division. "This was the decisive quarter to the point where we are a head-on challenger" to (Nasdaq: CSCO) and (Nasdaq: JNPR), he says.

What has Alcatel particularly jazzed is that it took second place in Synergy's "IP edge aggregation routing" category, with 23.6 percent market share in the third quarter -- surpassing Juniper's 19.7 percent but still trailing Cisco's 45.9 percent. (See Alcatel Seizes #2 Position.) Alcatel's IP edge routing market share stood at just 3.1 percent after the first quarter of 2005.

But Juniper notes some extenuating circumstances. In the third quarter, Juniper's M7i and M10i routers were taken out of the service provider category and into the high-end enterprise category. So Alcatel's bump in revenues was accompanied by a decline in what Juniper was reporting: "We moved a substantial amount of revenue out of that category," a Juniper spokeswoman says.

She notes that Synergy still ranks Juniper second in all service provider edge routing, a superset of the IP edge category. Service provider edge routing in the third quarter was led by Cisco with a 48 percent share, followed by Juniper's 27 percent and Alcatel at roughly 14 percent, she says.

Note, also, that the numbers can be sliced up any number of ways. Alcatel's 7450 is an Ethernet box lacking full IP routing functionality. So some might argue it's not suitable for any "IP" category, although it's often sold in tandem with the 7750.

Even with such caveats, the numbers suggest Alcatel's IP division, launched after the TiMetra acquisition, has kicked into gear. Alwan claims the 7750 and 7450 have racked up 90 customers, 50 of them announced, with wins including (NYSE: BT; London: BTA), (NYSE: CHA), and (NYSE: SBC). (See Alcatel Picked for BT's 21CN, Alcatel Wins China Telecom Deal, and Scaling IPTV: Progress at SBC .)

Alcatel and Redback Networks Inc. (Nasdaq: RBAK) both appear to be on the rise in the broadband edge, says Heavy Reading analyst Rick Thompson. (See How Redback Won BellSouth.) Alcatel's port density and the integration of policy management have helped it in the video market, in particular, he notes.

Alcatel's recent strength in IPTV wins might have been a factor in Cisco's decision to acquire Scientific-Atlanta Inc. (NYSE: SFA), a move that could boost Cisco's prospects in service-provider video. (See Sci-Atlanta: Cisco's IPTV Lifeline?.) But Alcatel officials note that triple play wins account for only half their router revenues, implying the 7750 has proven attractive in normal routing cases as well.

Alcatel may have to work hard to maintain its presence in the IP edge. "That space is extremely challenging," Mota says. "They have to stay innovative, like Juniper in its earlier days."

Alcatel is trying. The company has been adding software features to the platforms and has increased Layer 2 support on the 7750. (See Alcatel Adds to MSE , Alcatel Enhances IP Tech, and Alcatel Taps Layer 2.)

— Craig Matsumoto, Senior Editor, Light Reading

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paulchenzhong 12/5/2012 | 4:08:40 AM
re: Alcatel Router Revenues Surge In short, 7450 is L2 Etherhet switch, 7750 is L3 router.
photon_tim 12/5/2012 | 2:52:41 AM
re: Alcatel Router Revenues Surge Is Huawei reporting any router numbers?
They appear to be a credible forth contender.

digits 12/5/2012 | 2:52:40 AM
re: Alcatel Router Revenues Surge Alcatel says this isn't a blip. Juniper says the niche sector numbers don't tell the whole story. But can Alcatel join Cisco and Juniper to make the leading pack a trio?
mtrehearne 12/5/2012 | 2:52:38 AM
re: Alcatel Router Revenues Surge Does JNPR have a box that competes head to head with the Alcatel 7450?
russ4br 12/5/2012 | 2:52:38 AM
re: Alcatel Router Revenues Surge It's a cause of concern more for JNPR than for CSCO.

JNPR has greatly benefited from a "dual-source" approach by carriers. In certain situations, JNPR was given a piece of business just in order to "keep CSCO honest". Now that ALA has a credible solution in the IP space, they might starting taking business away from JNPR - in the "dual-source" category.

It's curious that JNPR also tries to underplay the ALA gains in marketshare, saying that they moved a "big piece of revenue" to other category. Not surprisingly, JNPR moved the revenue to "high-end enterprise", in order to artificially get "powerpoint market share numbers" to shore up their claims that they are having traction in the Enterprise besides the NetScreen product line.

photon2 12/5/2012 | 2:52:37 AM
re: Alcatel Router Revenues Surge The 7450 is NOT a router...no BGP, no multicast...if you are not using MPLS it's just a enet switch...it should not be counted in the router category at all. No competition for Juniper in my mind...
paolo.franzoi 12/5/2012 | 2:52:36 AM
re: Alcatel Router Revenues Surge
Agreed with Photon2. What Alcatel is doing very well in is Metro Ethernet deployments.

Sisyphus 12/5/2012 | 2:52:36 AM
re: Alcatel Router Revenues Surge
Technicalley true, however the 7750/7450 combo is being used to deliver a variety of services via a highly scalable VPLS architecture, and this "L2 VPN" scaling abiity allows it to gnaw away at areas that have been traditional Cisco and Juniper router deployments.

It's still in the stars, though. The current upswing comes through heavy and desperate discounting -by ALA- that accompanies the VPLS value proposition, and perhaps overcomes concerns about its ability to truly scale to large service provider deployments. The L2 pitch is also a smart cultural fit with the ATM Bellhead stalwarts, who have been now in the DSLAM access and thus have a thing or two to say with aggregation deloyments.

This will be quite the fascinating battle to watch... Alcatel is approaching it smartly, but of course it's also their only chance to position themselves in the emerging infrastructure. However, I personaly have some reservations about Ethernet's ability to truly scale to this level. Wasn't it suposed to be about plug&play provisioning simplicity? Looking at VPLS now -labels in label hierachies to support QoS and business services and reduce scalability issues- is sure doesn't look that simple. In fact, L3 stuff looks far more decipherable - in fact it looks like L2 is now re-inventing the whole L3 wheel at a rapid pace right now. Whether it's a good thing or not we'll see, and Alcatel's success depends on how quickl the market comes up with an answer.
photon2 12/5/2012 | 2:52:35 AM
re: Alcatel Router Revenues Surge Agree the strategy has been great for Alcatel...frankly it fits "the ATM heads" who liked layer 2...Ethernet is simple and BGP is hard, so these products appeal to the 'average' network manager is not as complex. However, just as the ATM networks were originally considered not complex with pt to pt connections, they grew unwieldy and unmanageable precisely because of all the connections. VPLS and next gen VPLS will not really solve this....My take is that smaller network providers and smaller enterprises will chose Layer 2 products, and larger providers and larger enterprises will stay with Layer 3 products. With some melding in the middle....but it won't be all one or the other.
tmc1 12/5/2012 | 2:52:35 AM
re: Alcatel Router Revenues Surge This really comes down to what your definition of a router is. If you are cisco or juniper then you will use your influence to make sure it is only the products that are sold by cisco or juniper.

By definition under the OSI model, any product that forwards at L3 based on IP addr info is doing routing, anything that forwards at L2 based on MAC addr is a switch. In addition ATM and FR forwarding occurs at L2 and is switching. This also includes L3 switching products that can perform either function and also run routing protocols. Most of these device actually perform routing in enterprise networks where traditionally a cisco 7500/7200 may have been used.

However i agree that a product that is used to do L2 switching and can also perform some routing function is not a router. This also would eliminate cisco's 6509 and 7600 "routers" which are essentially enterprise switches but they sell as routers into enterprise and SPs/RBOCs. For a while the 6509 may have been the best performing/feature rich router that cisco actually sold (circa 2001-2002) which makes it pretty confusing because it is an L3 switch.

Juniper and cisco want to keep the bar as high as possible so they want to define a router as a product that runs all the routing protocols, has channelized interfaces, ATM/FR support, POS, BGP4 and all IGP support, Multicast Routing, etc. This helps them defend their "turf".

The 7450 is not vlan centric, does not actually support VLANs and is not an L3 or L2 switch. Neither is it sold as such. It is architectually the same as the 7750 and has the same chipsets with some cost-reduction elements. It does not support BGP4 and has less interface support than the 7750 but is it a router. It is a router designed for ethernet services for people that do not want/need to pay for a full-fledged MSE-class router.

Instead of cisco and juniper trying to claim it is not a router, maybe they both should develop a product aimed at this specific sector (and not just a re-badged switch i.e. 7600). It seems that the strategy has been very successful for Alacatel... successful enough that cisco just spent $7B to try and compete with Alcatel.

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