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Optical/IP

Springtide Ebbing Away?

Lucent Technologies Inc.'s (NYSE: LU) Springtide services router -- now being used as a wireless router -- could be on the chopping block in the next round of corporate bloodletting, according to analysts who follow the company.

"I think that is actually one of the areas they will cut," says Hasan Iman, telecom equipment analyst at Thomas Weisel Partners. "Lucent has never been really big on data networking."

"Springtide is definitely high on my list of candidates to cut," agrees Lehman Brothers analyst Stephen Levy. "Lucent wrote off most of the goodwill related to Springtide last quarter."

"The next level of cuts [at Lucent] aren't going to be broad based," explains Iman. "They're going to have to start cutting divisions."

This is because Lucent, along with other vendors such as Ericsson AB (Nasdaq: ERICY) and Nortel Networks Corp. (NYSE/Toronto: NT), need to slash cash burn rate, and, as Iman sees it, only chopping divisions will, er, cut it.

A Lucent spokesman told Unstrung that the company does not comment on rumor and speculation (the old story…). However, he did say that the company is evaluating the Springtide product line. "We'll let you know," he says.

So that's encouraging…

However, the wireless market is still extremely important to Lucent, and the ebbing of Springtide could leave the firm with a big partner-shaped hole in its product line. Cisco Systems Inc.'s (Nasdaq: CSCO) 6500 and 7200 wireless routers (see Cisco's Wireless Wait) might be a natural fit for that hole, suggests Iman.

"I think a logical fit for them would be Cisco," says Iman. "Because some of the other major players have already allied with Juniper."

Indeed, It was Ericsson's move to develop the J20 wireless router with Juniper Networks Inc. (Nasdaq: JNPR) that helped to break the taboo that operators should source all of their wireless network equipment from one supplier.

"There are alternatives that Lucent could just integrate from third parties," agrees Levy.

Indeed there are. As well as IP networking players like Cisco and Juniper, there are a slew of startups out there that would be happy to have Lucent's business if it does decide to can the Springtide line (see Having a Flutter on the GGSNs).

If Lucent does drop Springtide, that will mean the failure of another of its major acquisitions of the last few years. Lucent bought Springtide -- the company -- in 2000 for $1.3 billion.

For those of you at the back that haven't been paying attention, wireless routers are the kit that help to enable all fancy-pants wireless data services promised with the coming of next-generation networks. Also known as GPRS Gateway Support Nodes (GGSNs) and Packet Data Serving Nodes (PDSN), they are the primary interface between a carrier’s radio and packet core networks. In their next-gen guises, these wireless routers comprise a new class of equipment that adds sophisticated service creation, billing, and IP traffic management capabilities to this strategic point in the network (see What's the Wireless Router Market Worth? for more details).

— Dan Jones, Senior Editor, Unstrung
http://www.unstrung.com
myresearch 12/4/2012 | 9:35:17 PM
re: Springtide Ebbing Away? Does anyone know what is the market size for GGSN this year, last year?
DanJones 12/4/2012 | 9:35:16 PM
re: Springtide Ebbing Away? Live and direct from this month's Wireless Oracle report:

"If the market for wireless routers is assumed to be 1.5% of total infrastructure spending in 2002-2004 and 2% in 2005-2006, the potential worldwide market would be worth $2.5 billion by 2005 and $4 billion by 2006. According to this scenario, the aggregate five-year total for the wireless router market comes in at around $8 billion."

There are some assumptions going on here, but that is our best estimate for the moment...
tjs 12/4/2012 | 9:35:09 PM
re: Springtide Ebbing Away? Springtide AND Nexabit are both history... Nexabit still doesn't work, and 3 years in and not a single paying customer for the TMX 880.

But even more amazing is that the Gotham Networks "switchless switch" is late stage due diligence at Lucent facilities. Hey guys ... HELLO.. there is a reason nobody bought one...
seeallwan 12/4/2012 | 9:35:08 PM
re: Springtide Ebbing Away? I have many friends still in Westford and tell me that SpringTide will be canceled, but they'll end up putting a ST type blade on the GX550?

Also hear that the TMX880 is a 50/50 to be cut. It continues to be in demos, but from what I hear, all customers are saying they want the CSD (Cascade) product lines cards and next-gen CSD gear (if any)?

18-24 mos ago, the Cascade product lines were gearing up for next-gen products with an IP/MPLS play, but LU kept that from happening, while trying to stick a dagger into the Cascade products while customers still wanted it.

It's amazing that LU higher ups said the Cascade products are old and nobody wants them, but yet the SpringTide, TMX880, PSAX all want the CSD technology ported over to there platforms.

LU does not have the vision in the Data networking space, and certainly too arrogant to listen to it's own customers.

Yet again, let 24 billion dollars go to waste due to politics and because bell labs didn't invent it.

fyi on the Gotham...LU did send engineers out to test this a few short weeks ago and others products from what I hear.
netskeptic 12/4/2012 | 9:34:56 PM
re: Springtide Ebbing Away? > ... $4 billion by 2006 ...

Here is an interesting take on the subject:

http://www.commsdesign.com/sto...

Thanks,

Netskpetic
BobbyMax 12/4/2012 | 9:34:34 PM
re: Springtide Ebbing Away? It was not clear why the Lucent acquired Springtide. It has never been profitable and Lucent has been burning a lot of money without generating any profit.

Lucent has not been very methodical in closing useless companies it acquired.
digerato 12/4/2012 | 9:33:58 PM
re: Springtide Ebbing Away? "If the market for wireless routers is assumed to be 1.5% of total infrastructure spending [...] the potential worldwide market would be worth $2.5 billion by 2005 and $4 billion by 2006"

Sounds good as a top-down forecast, but I think that it wildly optimistic. Why believe that GGSNs are going to be as much as 1.5% of infrastructure spend?

If you look at:

1) The highly oversubscribed role that a GGSN/PDSN plays in a wireless data network (gateways from one or more MSC(s) onto an IP network)
2) The low data volume because of the low data rates in 2.5G and 3G
3) The very low take-up of data services on wireless networks by subscribers

... then, the conclusion is that you just don't need many GGSNs per wireless network. And what is ASP on a GGSN -- $100K? You have to sell thousands to turn that into a multi-billion dollar market. How is that possible?

Digerato
MrLight 12/4/2012 | 9:33:31 PM
re: Springtide Ebbing Away? Netsceptic, that was a good link you provided to www.commdesgn.com on 3G deployment.

I have heard much the same:
1."The industry appears to have written off two-way video communication, for example, as totally unrealistic." ..."Video streaming on a handset simply kills the battery," .
2."after only two months of owning a 3G handset, many people stopped using picture messaging".
3."equipment makers are "in an even worse boat" than their carrier customers".
4."Within a year, Nortel, Lucent and Ericsson won't exist in the current form, and one of them will be de-listed from the stock exchange"
5."Although most chief technology officers working for carriers tend to see the network as key to their success, that may be no longer true, he observed."
6."In order to be successful in the wireless business, in many cases, you don't even have to own a network,"
7."Japan, NTT Docomo has been disappointed in the number of subscribers signing up for the world's first 3G offering: 400,000, instead of the 1.4 million subscribers the carrier had hoped for."
8."In Europe, meanwhile, operators are blaming the slow rollout on handset vendors' lag in delivering 3G models, while the handset manufacturers in turn point to the operators' inability to stabilize the 3G infrastructure. Furthermore, cash-strapped 3G license holders "appear to be doing everything they can to slow down the rollout of their 3G networks," .
9,"The technology is the problem" because [some of the currently deployed]handsets and GSM basestations are incompatible,"
10."We can't afford another failure like WAP."
11. "digital-rights management issue. A DRM algorithm must be integrated into handsets as well as into the infrastructure to safeguard valuable digital audio and video content, but the industry has yet to agree on a standard approach."
12.To reach the mass market that carriers covet, Schukai said, "It's our belief that 3G must do one of the following two things very well: It must be good at either saving time or killing time."

I like that last statement "saving time or killing time". I guess that goes with how they make money - by selling time.

But eventually they will find the applications that make money with 3G - maybe one is that it will ensure the partner is really at the office when they call from their cellphone and not their desk phone. Hopefully not. Making sure people are calling from where they say they are calling from will defintely be one marketable feature of 3G.

One unmarketable feature though would be obscene phone calls with "Restricted Number" on the display. Another would be PORN. It will be interesting to see how people use 3G...

MrLight :) had some light shed on him
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