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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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.

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?
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.

paulchenzhong 12/5/2012 | 4:08:40 AM
re: Alcatel Router Revenues Surge In short, 7450 is L2 Etherhet switch, 7750 is L3 router.
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