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Alcatel-Lucent Day One| December 4, 2006 | Competitive Update | Client Access |
On November 30th Alcatel-Lucent announced that it had completed its merger and was beginning operations as the world’s largest telecommunications equipment vendor (in terms of 2005 revenues). In its presentation the new company unveiled its new logo and indicated its new stock ticker symbol. More concretely, the vendor highlighted leading positions in several market segments, indicated how the company will be structured, and pointed to robust R&D and professional services organizations. • Current Perspective: Very positive on the official formation of Alcatel-Lucent – completing their planned merger. Though we’ve known a merger was in the works for almost eight months, “day one” signals the commencement of a new company. Operationally, the announcement brings no new capabilities or messaging (beyond a snappy new logo). It does, however, allow the two companies to begin meaningful work on joint sales, marketing and product development – executing on the oft-heard promises of scale and synergies. • Vendor Importance: Very high to Alcatel-Lucent because the company can finally begin tackling major issues that face any new, multinational, top-tier telecom vendor looking to build efficiency from R&D scale and product line synergies. As we all know, the two companies have spent the last eight months nailing down a new corporate organization, new logo, new messaging etc. Executing on product line rationalization and joint sales, however, will deliver the cost-efficiencies supposedly driving the merger. Now that the two companies are officially merged, they can actually start moving on these fronts. • Broadband Infrastructure Market Impact: Very high on the overall broadband infrastructure industry as the formal launch of Alcatel-Lucent puts into reality the creation of a market leading juggernaut that will compel all broadband access rivals to adapt new sales and marketing and product development strategies to confront a new mega-rival with more global channel resources at its disposal than previously. • Carrier Infrastructure Market Impact: Very high on the carrier infrastructure market, since service provides will need strong IP switching and routing platforms capable of delivering highly sophisticated solutions and increasingly greater assistance from their suppliers in the planning, execution, and operational aspects of their networks. The combined company’s depth in routing/switching and its global service organization, coupled with its leadership in next-generation (IMS) solutions, increases its stature as a long-term competitor. • Carrier IP Telephony Market Impact: Very high to competitors in the carrier IP telephony and multimedia market, as completion of the merger allows the new company to begin in earnest the extensive task of rationalizing NGN and IMS product portfolios. How long it takes Alcatel-Lucent to complete this process and how efficiently it is managed will have a significant influence on the competitive landscape over the next several years. • Optical Infrastructure Market Impact: Very high on the optical infrastructure market. It is no secret that Alcatel has been the world’s dominant optical vendor for the past five years. Now, with Lucent in the mix, Alcatel-Lucent can claim a strong customer base in every region of the world, strong products in every optical market segment, and accomplished R&D capabilities that both Alcatel and Lucent bring to the table. Without question, every optical systems vendor in the world should view this union as a formidable competitive threat. • Wireless Infrastructure Market Impact: High on the wireless infrastructure market, as competitors have known about the Alcatel-Lucent merger since April. They’ve seen the messages coming out of each vendor. They’ve been busily preparing to compete against the new telecom vendor. Regardless, the emergence of Alcatel-Lucent introduces a new vendor into the wireless market. More importantly, it’s a vendor that can actually start selling joint solutions and address issues of portfolio cuts, future product support etc. This makes it much more threatening than a “vendor in the making.” • Telecom Infrastructure Services Market Impact: Very high on the telecom infrastructure services market, since services leverages people and places, and in many cases it benefits from a high level of scale. The completion of the Alcatel-Lucent merger helps accomplish improvement in all three of these metrics, strongly improving its position against market leader Ericsson, as well as against the soon to be combined Nokia and Siemens. Lucent’s track record of mind share, services portfolio development and willingness to embrace the services business model has given the new company a successful template on which to build. Alcatel’s strengths in IP NGN and OSS transformation services will fortify the combined entity in a key services growth area.
Competitive Positives • Corporate handcuffs mandated by regulators restricted product line coordination prior to Alcatel-Lucent’s “day one.” Now, the vendor’s combined forces can forcibly engage in product line rationalization, including in-depth discussions with customers and prospects. The rationalization of overlapped product portfolios is key to driving R&D efficiencies. Equally important, substantive dialog with customers is required to settle worries about long-term support prospects and unlock suspended purchase decisions. To its credit, Alcatel-Lucent claims it is prepared to tackle product line rationalization head-on and early. • A blended sales force can finally begin executing on joint sales opportunities drawing from the assets of the combined companies. An expanded product catalog increases the depth of solutions offered by Alcatel-Lucent, making the new company more attractive to service providers as a one-stop shop for comprehensive solutions and professional services. Beyond deep product lines, combined sales teams can leverage new channels that were previously the domain of one or the other of the pre-merger companies, growing sales and executing on promised synergies. • Initial indications suggest that a comprehensive integration plan is getting effectively executed. On day one, Alcatel-Lucent announced several levels of the top management hierarchy. What’s more, it claimed that 100% of its workforce is mapped to units in the new structure. Crisp execution of the integration plan is essential to avoid the quagmire that results when employees are left without an “identity” within a new organization. Proof points help reassure customers and set a positive environment for aggressive new sales efforts.
Competitive Concerns • Regardless of any celebratory bunting, the core capabilities and messaging of the combined companies has not changed. It may be day one for Alcatel-Lucent, but it is a company the market has known about since April. An intermixed portfolio does not represent innovation. Yes, sales forces can now begin selling this portfolio and product managers can focus on rationalization. Its product-level capabilities, however, remain the same. • In many ways, “day one” marks the start of the tough work: rationalization plans, business process integration, and sales force education – to name a few tasks. Corporate energy expended to execute this work successfully will continue to distract from the day-to-day product planning, development, and sales efforts. Just as important, the efforts are likely to cause continuing disruption across the new corporation, jeopardizing schedules and damaging customer relationships. • With Alcatel-Lucent’s stated goal of EUR 1.5 billion in efficiencies overshadowing the combined work force, “day one” represents – to paraphrase France’s CGT – one wedding and thousands of funerals. Political and marketing troubles are sure to follow as the company comes to grips with the need to achieve required efficiencies. Dealing effectively with morale disruptions is essential, but the sheer magnitude of the problem makes a painless transition nearly impossible. Purchase Report Bundle
Purchase Individual Reports
Client Access Links
Follow the links below to the reports on CurrentCOMPETE: Alcatel-Lucent Day One: Taking Broadband to a New ALtitude Alcatel-Lucent Day One: The Carrier Infrastructure View Alcatel-Lucent Day One: NGN and IMS Product Rationalization is Crucial Next Step Alcatel-Lucent Day One: Optical’s 800lb Gorilla Bulks Up Alcatel-Lucent Day One: The Long and Winding Wireless Road Ahead Alcatel-Lucent Day One: In Services, Doubling Up Resources is Good, Not Bad |
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