Madden: Nokia and Alcatel-Lucent combine, but more work is ahead

joe madden

     Joe Madden

Nokia's acquisition of Alcatel-Lucent will combine two complex companies, with millions of base stations in the field and thousands of different products.

In some ways, this is a good move for Nokia, as they will gain a footprint in the USA along with vital optical and IP networking business lines.

This deal doubles the Nokia small cell customer base.

On the other side,  Alcatel-Lucent has no choice -- this deal is a lifeboat as the ship slowly sinks.

After the acquisition, Nokia Corporation will have strong customer relationships on every continent and the ability to develop end-to-end networks. The company will be focused on working to rationalize the product line, with more than 8 different base station platforms operating in the field.

From a technical point of view, the Nokia/ALU merger is happening at the right time. Why develop two separate 5G platforms? The new Nokia can develop "the networks of the future", with co-developed mobile infrastructure, IP infrastructure, and cloud services. As Nokia CEO Rajeev Suri rightly points out, the timing is a lot better than the timing of the Motorola and Nortel acquisitions over the years.

However, from a business point of view there is still a major gap in the Nokia/ALU plan. Where is the sales channel to the enterprise?

Ericsson has arranged two major partnerships to address new markets in the enterprise. In May, HP bought Aruba and created a strong channel for Enterprise Wi-Fi. Four months later, Ericsson cut a deal to use that channel for mobile infrastructure as it converges with Enterprise Wi-Fi. Then, during November, Ericsson announced a second partnership with Cisco, including joint product development, IP cross-licensing, and sales agreements.

Ericsson has arguably captured two of the most attractive enterprise sales channels. HP/Aruba is a strong combination, with Aruba's share of the Enterprise Wi-Fi market and HP's huge Rolodex of CIOs. Cisco has a much stronger share of the Enterprise Wi-Fi market and a similar long list of sales contacts in IT departments. The two deals set up Ericsson nicely to push the Radio Dot, picocell, or other indoor mobile solutions into the business world.

Huawei has its own enterprise sales force which isn't doing badly. Huawei has deployed about 50,000 LampSite sectors, many of which cover shopping malls, corporate buildings, and transportation hubs in Asia. Huawei takes the lead in selling to the enterprise, and the Asian mobile operators trust them to implement the system well so the operators simply go along with it. This model won't work in the West, but it's going well in China.

Nokia and ALU will understandably focus first on their internal issues, integrating company infrastructure, cutting back on duplication in R&D, and reducing their number of products. But they need to avoid the trap of focusing exclusively on network operator customers. They still need to add an enterprise strategy.

Joe Madden is Principal Analyst at Mobile Experts LLC. Mobile Experts is a network of market and technology experts that provide market analysis on the mobile infrastructure and mobile handset markets. He provides market forecasts for handset, DAS, small cell, and base station markets, with in-depth research down to the nitty gritty details of frequency bands and power levels. Mr. Madden graduated, cum laude, from UCLA in 1989 and is a Silicon Valley veteran. He has survived IPOs, LBOs, divestitures, acquistions, and mergers during his 24 years in mobile communications.

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