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donniall 12/5/2012 | 3:16:47 AM
re: Could Huawei Buy Marconi? The continued rise of Huawei, and the speed at which they appear to be winning business mindshare is incredible - and a credit to them. Does anyone know how long did it take Cisco to win business from one of the big carriers? I was always under the impression (maybe wrongly) that this proved to be a major hurdle for Cisco ....? If so, the recent BT 21CN announcement - which will be watched closely by countless other service providers - proves that the acceleration to commoditisation is arriving at its natural conclusion: COST is the prime differentiator ....
Bad news if you are one of the big guys desperately trying to keep your head above water after the recent downturn in telecoms ...

gbennett 12/5/2012 | 3:16:46 AM
re: Could Huawei Buy Marconi? Comrades,
I don't have an MBA, but my amateur opinion would be that acquiring Marconi would not be the most cost-effective way to achieve the objective - ie. to assure BT that Huawei is able to support the rollout of Huawei's portion of the 21CN project.

I know it sounds callous to say this, but a much more pragmatic approach for Huawei would be to simply "take" the Marconi personel they need. In other words, just offer them jobs. After all, we know that Marconi will be making significant layoffs in the light of BT's decision.

So who do Huawei actually need from Marconi?

First off, they need about a dozen or so key personel who actually understand and contribute towards the BT/Marconi relationship. Finding the right dozen or so people is a huge challenge, because there are a lot of Marconi people who think they are essential to the BT relationship. At the end of the day only BT can really say who the right people are, and ethically it's unlikely that they would just give Huawei a list - good grief it make me shiver to think about it because we're talking about peoples' livelihoods here!

In addition, Huawei could cherry-pick the field engineers they need from the Marconi services organisation. I'm sure a lot of these folks would jump at the opportunity because Marconi (in their wisdom) actually tried to shut down the services organisation about three years ago - so it's not like Marconi actually has any established vision in this area.

So what about the thousands of other UK and international personnel that Huawei would inherit as a part of a potential Marconi acquisition?


- Why would Huawei "buy" hundreds of Marconi manufacturing employees, who earn at least four times what a Shenzen-based employee earns when those Shenzen employees apparently already make a world-class product?

- Why would Huawei "buy" hundreds of expensive Marconi R&D folks when 60% of Huawei employees already work in R&D or engineering? In fact we can be pretty sure that R&D is the last of Huawei's problems when it comes to the BT relationship. Word is their DSLAM is one of the most advanced products in that market segment.

- Why would Huawei "buy" Marconi marketing folks, G&A folks and HR folks who, to put it charitably, are unlikely to contribute to the Huawei/BT relationship?

Bottom line, by buying Marconi, about 70% of the personnel that they would acquire would have no direct contribution to make to the 21CN deal. And let's face it, it's not like Marconi is generating a bunch of new customers to whom Huawei doesn't already have access. Huawei should be on the short list for any SP in their right mind today. They don't need Marconi's help for that.

Acquiring Marconi? That kind of inefficient management decision doesn't strike me as Huawei's style.

And by the way, all of the folks I've indicated as being orthogonal to Huawei's objectives for the 21CN project are, in fact, essential, and active contributors to Marconi's day to day business today. If they weren't then, given the savage redundancies Marconi has made in the past few years, they wouldn't still be working there.

I wish all of the Marconi employees the best of luck in the weeks to come. The market is in a hell of a lot better shape today than two years ago, so there really can be life after Marconi!

Diogene 12/5/2012 | 3:16:44 AM
re: Could Huawei Buy Marconi? I think it is better for Marconi to be acquired by Huawey than others. Huawey is in the position to learn from Marconi technical experience and customer (BT) knowledge. Otherwise, its destiny is to be acquired by other vendors when it's too late, for Marconi, to have something to say.

Ibeenframed 12/5/2012 | 3:16:43 AM
re: Could Huawei Buy Marconi? Comrades????

Funny way to start a post about a company from a communist country - very tounge in cheek Geoff.

Your posting assumes that the only value for Huawei's acquisition of Marconi would relate to the 21CN deal.

If you consider routes to market, broader customer base it may add additional value to the deal.
particle_man 12/5/2012 | 3:16:43 AM
re: Could Huawei Buy Marconi? It's not clear to me, even with their new 10B line of credit, that Huawei has the balance sheet for this sort of transaction. It certainly wouldn't be an accretive purchase.

I think Geoff nailed it - they can just hire whomever they need off the Marconi payroll.
gbennett 12/5/2012 | 3:16:41 AM
re: Could Huawei Buy Marconi? Comrade Ibeenframed,

Well I kind of consider that communism is dead, or at least mortally wounded these days. We just have to wait for the remaining "communist" countries to figure out the benefits of democracy and capitalism and we're all set.

So that means that the word "comrade" can return to its original meaning..."A person who shares one's interests or activities; a friend or companion." The word is also androgenous, unlike "guy", "dude", or "mate".

Anyway, to your point on the wider benefits of Huawei acquiring Marconi.

Let's think about two aspects of this problem:

1. Marconi has a lot of successful telcos as their existing customers.

2. Marconi has decades of optical technology development, some of which is truly world class.

First Issues: Great Customers
You're right. If you look at Marconi's European customer list, it contains a bunch of great accounts: FT, DT, Telia-Sonera, Belgacom, etc.

But in all cases these customers buy SDH or DWDM equipment. Huawei makes that stuff already, and sells it for about 25% of the equivalent cost of Marconi, Nortel, Lucent or Alcatel.

And I suppose the most important question is - does Huawei need to acquire Marconi in order to penetrate these key accounts? Don't you think BT's decision to use Huawei will blow open the doors in even the most stubborn and jurassic PTTs across Europe? Huawei has a comparatively small team here in EMEA and I bet the phone has been ringing off the hook since last week's decision.

Second Issue: Marconi Optical Technology
The Huaweu optical equipment is considerably less advanced than the other vendors I've named above (despite this it still does the job or SPs wouldn't buy it, no matter how cheap it is). But with a massive investment in R&D Huawei is catching up fast. Most importantly those developments will continue to result in products that are much cheaper than the opposition.

Something that isn't widely discussed is product line consistency. My impression is that Huawei's products are more consistent in terms of their hardware architecture, user interface and management capabilities. This is certainly true for the Huawei router products, which use a single codebase across the product range. In contrast the Marconi optical products are based on a mish-mash of hardware platforms, different embedded executives, and inconsistent CLIs. This is because these products derive from three or four different companies within the old GEC conglomerate. It's also because Marconi never really came to terms with the need for centralised control over engineering projects, so it was quite common to find products made in the UK with one embedded OS, products made in Germany with a different OS, and products made in Italy with a third OS. No coordination at all.

I may have this analysis all wrong. Folks who read my ravings on other boards on this site may be aware that I'm very anti-acquisition, especially when technology is the goal of the acquisition. My experience of (many) such acquisitions has been very negative.

bitguy 12/5/2012 | 3:16:40 AM
re: Could Huawei Buy Marconi? Hi Geoff,

Re your first point - I agree to a certain extent, Huawei are definitely shaking off the cheap & nasty image they had 18 months ago, but they could buy a lot of trust within those accounts and an instant services organisation - question is, is it worth 500 million pounds? Not all in one chunk IMHO.

If I was buying, I'd buy the front end of the business (sales, customer engineering, services) and EOL the product set (moving the IP into my own) with great haste so I could get rid of the duplication.

Re your second point, not (quite so) true. Its all managed by one NMS and the LCT is pretty consistent. A lot of what you mention is gone.

I agree with your acquisition comment - there are exceptionally few who do it well (Cisco for one, and they mess up sometimes).
ozip 12/5/2012 | 3:16:40 AM
re: Could Huawei Buy Marconi? All companies win and loose deals. Although about 1/3 of marconi's revenue comes from the UK and Im guessing a big part of that from BT, it will take some time for the BT revenue stream to decline.

They will re-orginise, reduce the number of personnel in the UK and move on.

paolo.franzoi 12/5/2012 | 3:16:39 AM
re: Could Huawei Buy Marconi?
I believe that an acquisition of Marconi makes no sense for Huawei. First off, they have already won the business. It is easier to hire a professional services group (using IBM or GE as examples) than it will be to buy one. The integration challenges would be huge and the payback small. The product overlap is large so lots of product churn would occur as well. If I was advising Huawei, I would use my M&A dollars to enter the US. A company like Tellabs might make sense for Huawei.

russ4br 12/5/2012 | 3:16:37 AM
re: Could Huawei Buy Marconi? They will re-orginise, reduce the number of personnel in the UK and move on.

"Marconi prepares to welcome suitors"

The re-organization has started.

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