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Routing

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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Mark Seery 12/5/2012 | 2:51:59 AM
re: Alcatel Router Revenues Surge Doug,

please see my previous comments on segmenting by application.
douggreen 12/5/2012 | 2:51:59 AM
re: Alcatel Router Revenues Surge Mark,

As I have argued many times before, while segmenting markets by technolgy can be a useful market segmentations basically skip the one segmentation that makes the most sense: Segmentation by application. These are products that actually compete for each other for a certain type of business, regardless of their underlying technology.

I first examined this in an article in XChange magazine 5 years ago (when the market was more complex, with BLECs, CLECs, etc.). If you are really bored, here is the link...

http://www.xchangemag.com/arti...

This is not usually done because, although it is a lot more useful, it is hard to do and requires a knowledge of the various carrier network architectures, and even their business models. In my experience, this is just too much to ask of most of the people who do market analysis.

So, I really don't care much about the switch/router debate unless it is put into the context of a specific application space.

douggreen 12/5/2012 | 2:51:58 AM
re: Alcatel Router Revenues Surge Mark,

So, how about a crack at a reasonable set of market segments for routers and switches defined by application (network type, SP business model, network location)? To be useful, it has to be granular enough, but not contain too many categories.

I could do it for transport equipment, but you are much better suited to do it for routers. Care to give it a try?
konafella 12/5/2012 | 2:51:53 AM
re: Alcatel Router Revenues Surge So I would summarize this thread with two conclusions:

1) everyone has their own definition of a router vs a switch, and GMPLS and MPLS L2 PE capabilities clearly confuse the issues further.

2) most agree that 7450 deserves classification as a router

So what about the Alcatel 7250? Is it also a router?

kf
materialgirl 12/5/2012 | 2:51:52 AM
re: Alcatel Router Revenues Surge Here is a shot from outer space on market segmentation. Service providers want a cheap, fast, network that is simple to manage. This implies using switches. However, fixed routes get hard to manage as they must be changed manually over time as traffic patterns change. Automatically flexible routes, via routers, are easy to manage, but expensive in that the processing required in the box gets costly.

So, what they want is the "right" mix of cheap forwarding, with easy-to-manage routes. By definition, this seems like a hybrid beast.
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