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Routing

TiMetra at Heart of AlcaLu's Shift

The telecom sector's history is littered with misguided and overpriced acquisitions that have proven expensive, flawed, damaging and sometimes even fatal. But occasionally there's a gem and Alcatel-Lucent's US$150 million acquisition of IP router startup TiMetra in 2003 is not only a candidate for vendor acquisition of the century but, arguably, has proven to be life-saving.

One can reasonably argue that Alcatel-Lucent would have already been dismantled, or gone the way of Nortel, if it wasn't for the IP division that was built from that acquisition a decade ago.

That deal was brokered even before the TiMetra team, led by Basil Alwan, had shipped a commercial product. And not everyone thought it a good move at the time. As Light Reading reported, one venture capitalist was highly cynical in an email comment: "What a ridiculous price. I'd like that banker representing TiMetra to be on my team! He can sell ice to Eskimos!" (See Alcatel & TiMetra Seal the Deal.)

Incredibly, 10 years on, Alwan is still at Alcatel-Lucent, and, not surprisingly, is one of the vendor's shining stars. The company has a lot to thank him for, beyond sticking with the cause. The IP division, from a standing start, has grown steadily during the past decade and is battling Huawei Technologies Co. Ltd. for the number two spot behind Cisco Systems Inc. in the global router market share pecking order, according to Infonetics Research Inc.

Now Alwan's business unit (which includes the optical gear as well as the IP routing platforms) is at the heart of the vendor's "Shift Plan" to resurrect the vendor. (See Alcatel-Lucent Builds Future Around IP.)

Alcatel-Lucent CEO Michel Combes, who has been with the company only a matter of months, even name-checked TiMetra as he explained how Alwan's group will be responsible for driving sales and margin growth in the next few years.

Alcatel-Lucent's 2012 financials show how important the IP division has been: Its revenues increased by 24.2 percent year-on-year to reach €1.97 billion (US$2.6 billion), about 23 percent of the company's networks sales and nearly 14 percent of the vendor's total sales for the year. And while IP equipment sales increased, optical and mobile infrastructure revenues declined year-on-year, while fixed-line product sales were flat.

The IP division is also at the heart of the vendor's software-defined networking (SDN) efforts. (See Alcatel-Lucent Spins Up Its SDN.)

Does Alwan's IP and optical group have what it takes to keep Alcatel-Lucent afloat? Perhaps, if Combes can line up and execute all the separate parts of his plan (which include all sorts of cost cuts and financial maneuvers).

But without Alwan and the TiMetra legacy, Combes would likely have nothing to keep afloat.

— Ray Le Maistre, Editor-in-Chief, Light Reading

ip-router-eng 7/8/2013 | 3:02:11 PM
re: TiMetra at Heart of AlcaLu's Shift Garci- The heart of ALU's IP is also in Kanata. And yes, Kanata is the heart of the other stuff you mentioned.
Garci 7/6/2013 | 2:59:50 AM
re: TiMetra at Heart of AlcaLu's Shift The heart of ALU's IP is in mountain view, but Ottawa (Kanata) is the heart of the mobile backhaul division, a huge chunk of the newtork management component and all the ATM/POS/Timing side of the house
ip-router-eng 6/26/2013 | 2:21:11 PM
re: TiMetra at Heart of AlcaLu's Shift myhui - answer to your 3 questions is yes, really yes, and yes IP R&D.
Sacha Gera 6/23/2013 | 11:08:53 PM
re: TiMetra at Heart of AlcaLu's Shift The heart of ALUs IP r&d is done in Ottawa stemming from the original newbridge office... 2300 engineers
myhui 6/22/2013 | 2:30:13 AM
re: TiMetra at Heart of AlcaLu's Shift ALU bought Newbridge? Really? Do they still have an R&D presence in Ottawa, Canada?
ip-router-eng 6/21/2013 | 8:51:23 PM
re: TiMetra at Heart of AlcaLu's Shift Let's not also forget the Newbridge acquisition.
jj 6/21/2013 | 5:15:50 PM
re: TiMetra at Heart of AlcaLu's Shift If ALU has acquired RedBack then they would have been dead long back. Ericsson is struggling to get anything from Redback acquistion other than burning money for useless R&D.
Ray Le Maistre 6/21/2013 | 11:31:10 AM
re: TiMetra at Heart of AlcaLu's Shift It has been suggested on Twitter that I may have forgotten about the fixed broadband access part of ALU's business in my assessment. BUt I hadn't - I hadn't forgotten any part of it. My contention is that without the IP division, Alcatel-Lucent would not exist today in its current for, if at all. The IP division has propped the company up for the past few years and an argument could be made that the IP division has a greater market value than the whole of ALU.

Of course, this is all just opinion. Without TiMetra Alcatel may have developed something inhouse that was even better, or maybe Lucent would have. OR maybe it would acquired Redback instead of Ericsson. We don't know.

Right now, though, my view is that the ALU team has the IP division to thank for even being able to execute a turnaround strategy.

I'm more than happy to be told how wrong I am...
bibliotastic 6/21/2013 | 11:21:20 AM
re: TiMetra at Heart of AlcaLu's Shift Yep, the TiMetra acquisition is the exception that proves the rule - most tech M&A is value destructive (except for the VC sellers, bankers and lawyers).
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