Alcatel-Lucent Preparing to Sell Enterprise Business Unit; But Why?
According to this report by Dana Cimilluca in the Wall Street Journal, Alcatel-Lucent has hired advisers to find companies that will acquire its Enterprise Business Unit. This part of the business sells office telephones, PBXs and network gear but, most importantly from Opus Research’s point-of-view, it is where Genesys Labs has come home to roost.
Now the time to speculate has begun, with unnamed analysts placing a value of “greater than $1 billion but less than $2 billion” on the operations and assets for sale. Named candidates (once again, all speculation) include (with my rating on the likelihood) Microsoft (highly unlikely that it will add another line of hardware, especially phones), HP (unlikely, but could be a maneuver to tweak Cisco) and L.M. Ericsson (uncertain, I can’t really see the point except to grab market share).
In separate conversations (and on the Twitter stream) IBM’s name has been invoked. Like most major system integrators, Big Blue has generated significant revenues in recent years using its middleware (WebSphere) to meld its own software, hardware and systems with existing infrastructure and multi-vendor resources that make up today’s “unified communications” solutions. But IBM has “been-there-done-that” with PBXs and phones. It bought and then spun off Rolm (which is now Siemens Enterprise) back in the 1980s and 1990s when the functions and standards around CTI (Computer Telephone Integration) was being defined chiefly as IBM Callpath, Geotel (now part of Cisco’s Collaborative Contact Center Business Unit) and Genesys (now considered the gem of ALU Enterprise Division). IBM is highly unlikely to plunk down $1+ billion to get back in the game.
So let’s step back and think about what the impending sale might signal. From my perspective, it is the latest evidence that ALU has been unable to assimilate the porous nature of enterprise computing and communications. It’s a shame because it has some of the best marketing and positioning statements in the industry. The HLN (High Leverage Network) which I discussed last September is a powerful platform for innovation and application development and has the potential to destroy the “firewall” between enterprise and carrier networks.
In recent analysts’ meetings, the Enterprise Group was indicating that there were some real opportunities to get Genesys application software up and running over top of the HLN, especially noting that many of the sales of the core Customer Interaction Platform were being made to traditional carriers and being instantiated in their “Clouds.” The rebranding fo the entire Enterprise line as OpenTouch laid the foundation for more links over carrier networks.
The criticism logged in the WSJ article is that Enterprise accounted for “only 10%” of total revenue for ALU and that the $1 billion asking price would take a meaningful dent out of the company’s debt. But no holistic approach to selling gear and software to carriers can be independent of enterprise infrastructure. That is a meaningful 10% that has been a door opener and a key component for some major, profitable “wins” with modern service providers.
That said, you can’t forget that the Lucent side of ALU has been down this path before when it was forced to spin-off its Business Communications division in 2000. That entity, now known as Avaya, has been owned by private equity funds Silver Lake and TPG since 2007. In that time, rather than divesting assets, it has acquired the enterprise division of Nortel, expanded into Europe with the acquisition of Tenovis and paired up with Tata Telecom (now called Avaya Global Connect). By the way, Wikipedia lists several other acquisitions, including Vista, VPNet. Quintus, Routescience, Nimcat Networks, Spectel, Ubiquity Software and Traverse Network. And lest we forget Silver Lake is also a major investor in Skype, which is the prototype for the Next Generation Service Provider.
Observing the success of the Avaya roll-up, makes me think that this might be a good time for the Gores Group (half owner of Siemens Enterprise Communications) to look into melding ALU’s Enterprise Communications line-up with its own. The OpenTouch brand for Alcatel-Lucent Enterprise products (announced in January of this year) seemed like an homage to Siemens’ OpenScape line of Unified Communications software. Maybe there is a stronger connection than the mere naming convention indicates.