tag:blogger.com,1999:blog-90822254527904210732024-03-12T20:10:08.610-07:00Telecommunications and Networking IndustryIndustry Updates. Summary of top M&A deals. Top Executives on-the-move. Industry consolidation. Earnings Releases. Cisco Systems Competitors. Top Players in the industry.Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.comBlogger34125tag:blogger.com,1999:blog-9082225452790421073.post-70988015533633674692008-07-22T11:04:00.000-07:002008-07-22T11:10:39.176-07:00More pressure for Cisco or last survival effort?<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjSbFzRY7RQe7kowCn5c_XV0twhT7zhf8WdB8kHmLpU84cxHvZJMCAFb28trgSCBlxNyTSx-2RNCKezkoYRZ99AVN8pYP1M35wcKlGWbdhyciFPmESW7s0en1F6_4hfOe9VAsj1294dM1k/s1600-h/logo+brocade.gif"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjSbFzRY7RQe7kowCn5c_XV0twhT7zhf8WdB8kHmLpU84cxHvZJMCAFb28trgSCBlxNyTSx-2RNCKezkoYRZ99AVN8pYP1M35wcKlGWbdhyciFPmESW7s0en1F6_4hfOe9VAsj1294dM1k/s200/logo+brocade.gif" border="0" alt=""id="BLOGGER_PHOTO_ID_5225902416859171650" /></a><br />Brocade Communications Systems Inc., dominant in an obscure corner of the data storage market, wants a piece of a bigger pie: Cisco Systems Inc.'s cash cow business of networking equipment that transports Internet traffic. San Jose-based Brocade said Monday it has agreed to pay $3 billion to acquire one of Cisco's smaller competitors, Foundry Networks Inc. The deal is the latest sign of forces that are driving together companies which serve separate niches in networking, allowing them to offer customers a broader line of products that work together.<br /><br />The merger agreement calls for Brocade to pay a combination of $18.50 of cash plus 0.0907 share of Brocade common stock for each share of Foundry's common stock, representing a total value of $19.25 a share or 41 percent premium to Foundry’s closing stock price Monday before the deal was announced. Brocade would raise $1.5 billion in debt to finance the acquisition. No comments were made on whether Brocade anticipates any layoffs; however Brocade's and Foundry Networks' product lines don't overlap, so there would be few obvious areas to cut. Deal is supposed to be "additive" to Brocade.<br /><br />The deal moves both companies beyond being niche players in the marketplace. The price premium Brocade paid for Foundry was a little high but that’s what you need to acquire a technology leader. As a result, Brocade will be able to jump quicker into the market than some of their competitors. The acquisition would combine two companies with deep presence in the data center space and cause a direct challenge to Cisco. Surging Internet traffic, especially in bandwidth-hogging video, has driven intense demand for the routers and switches that direct Internet traffic, Cisco's home territory. That has also lifted the fortunes of Cisco's smaller rivals, including Santa Clara-based Foundry Networks, which specializes in high-end networking gear, making them attractive takeover targets.<br /><br />Brocade wants Foundry Networks because its primary business, dominant in a type of switch that connects servers to data storage machines -- is under pressure. Data centers are changing, and networking companies are focusing on acquisitions or expensive R&D efforts to come up with technologies that make the servers, storage and related equipment more robust and easier to manage. The acquisition promises to make Brocade a better-rounded competitor to Cisco, but isn't likely to significantly jeopardize Cisco's dominance as Foundry Networks, with $607 million in sales last year, is still considered a niche player. As servers become more powerful, and information technology managers demand more control over increasingly complicated machinery, Cisco has been advocating that the Fiber Channel and Ethernet technologies themselves should be merged somewhat in a direct assault to the core business of Brocade and Foundry Networks. Enterprises and Service Providers alike really need to reduce the complexity, especially at the high end of the data centers.<br /><br />Sooner or later, this type of acquisition was likely to happen. It was a matter of who and when. How much impact will cause on Cisco? It remains to be seen. However, Cisco’s dominance on end-to-end solutions will continue to be a significant competitive advantage and one acquisition in just one of the several niches markets that Cisco has presence on should not create big market disruptions. Granted, it may lose some temporary market share on data centers. Let’s wait and see Cisco’s next move and don’t be surprised if we face yet another round of acquisitions on this space.Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.com6tag:blogger.com,1999:blog-9082225452790421073.post-35408800238550958392008-06-26T15:20:00.000-07:002008-06-26T15:28:43.082-07:00Nokia to buy Symbian, but still no changes in Mobility<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjXeKlUyuq29_tWZrb7ID8m1dtv5YAh6TC_KjUZE7NILMdSBTGoDmWX1hiiF43Qux6tcMxJQVZe5qMAlh0in2v_HS7pM-_UPyWqgri37Ajzj7V_TnERc97xEdQOhuLxxvGfoM7chWf_NWg/s1600-h/Symbian_Front.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjXeKlUyuq29_tWZrb7ID8m1dtv5YAh6TC_KjUZE7NILMdSBTGoDmWX1hiiF43Qux6tcMxJQVZe5qMAlh0in2v_HS7pM-_UPyWqgri37Ajzj7V_TnERc97xEdQOhuLxxvGfoM7chWf_NWg/s200/Symbian_Front.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5216319114318252994" /></a><br />Nokia, which had long owned a substantial portion of Symbian, the company behind the popular proprietary mobile operating system of the same name, announced Tuesday that it would be buying the rest of the company, 52% for approximately $410 million. In addition to purchasing Symbian, Nokia will place the code in the hands of a new vendor-neutral organization: The Symbian Foundation. <br /><br />Symbian is already the leading open platform for mobile devices. Through this acquisition and the establishment of the Symbian Foundation, it will clearly be the most attractive platform for mobile innovation. Hopefully, this will drive the development of new and forceful Web-enabled applications to delight a new generation of consumers. According to sources at Nokia, code will be released to the public for the first time in either the last quarter of 2008 or the first quarter of 2009. All of Symbian OS and its development tools will be made available by 2010. In short, Symbian and its major interfaces are well on their way to becoming a completely open source operating system and development platform. So far, good news.<br /><br />In my opinion, all Nokia is doing by acquiring Symbian is to make a defensive play, because even as Symbian has grown into the dominant supplier of smartphone operating systems, it is still being challenged by several new strong players. For instance, Google challenged the commercial/business model, stating that its Android platform has reduced the cost of software to almost zero. Also, the LiMo Foundation, a consortium working on a Linux-based operating system for mobile devices, has strong support from network operators, which have been attracted by its governance model. And, of course, no one can ignore Apple and the iPhone as the company has raised the bar from a technical perspective and consumer’s attraction. But, where is Microsoft in this chess game? I just don’t think they might be able to affect the mobile device market. Certainly, Microsoft may go after BlackBerry powerhouse Research In Motion, but at this point, it’s more likely to see RIM/Google or RIM/Nokia, especially with Microsoft still trying to deal with Yahoo.<br /><br />In summary, this acquisition will solidify Nokia's presence on the mobile market despite anything that Google, LiMo, or Apple can do. However, let’s not forget that it wasn't so long ago that Apple had no mobile phone market share, and betting against Google or Linux has not been a winning proposition in any market lately. More to come for sure…Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.com0tag:blogger.com,1999:blog-9082225452790421073.post-34756452096961293892008-06-21T19:02:00.000-07:002008-06-21T19:09:10.502-07:00Is Yahoo really changing?<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi0afkUk9mYVWXQPEEF0y860zVHCwINJhXld1z6ABTlL9-TfAe0kqilJjObIjldJcg_uK5GgGYqMeNxUeWiYEP7JObwH6_3P_2XQ20tBgIKgRYMd7g_sz884bzrrf2tXxIwAGVzkPXVzXQ/s1600-h/Yahoo_Headquarters.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi0afkUk9mYVWXQPEEF0y860zVHCwINJhXld1z6ABTlL9-TfAe0kqilJjObIjldJcg_uK5GgGYqMeNxUeWiYEP7JObwH6_3P_2XQ20tBgIKgRYMd7g_sz884bzrrf2tXxIwAGVzkPXVzXQ/s200/Yahoo_Headquarters.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5214522104030694162" /></a><br />At first, the initiatives Yahoo Inc. announced this past week, including new email product offerings and mobile deals in Asia, paint the company as a Web giant bravely regrouping for future battles. But rebel shareholders looking for a proxy battle, top executives heading for the exits and a reported major reorganization may only create even more trouble in an already sinking ship.<br /><br />Right now, the company has an air of confusion about all of this. First, it's not surprising that Yahoo is reorganizing to try to accelerate growth. However, if the growth doesn't happen, the reorganization won't matter. A reshuffling of product organization could be made public in coming days, with the company centralizing several product groups, including its mail, search and home-page units. But, be careful with reorganizations since sometimes companies focus on looking busy instead of actually working on the company look better.<br /><br />Secondly, Yahoo pointed to recent acquisitions such as RightMedia and Maven Networks, the expansion of its newspaper consortium and its new search outsourcing deal with Google Inc.<br /><br />Thirdly, the expansion of email domains it currently offers. Yahoo says its user base of 260 million worldwide can start fresh with an address of their choosing by setting up an account that has ymail.com or rocketmail.com domains as their new email identity. Also, the company has signed deals to be the preferred search service with five more mobile-telecommunications companies in Asia, thus totaling 23 such relationships, increasing its share of the market for mobile-search queries. The focus on e-mail and mobility makes sense because these have traditionally been among Yahoo strengths.<br /><br />Shareholders do not look happy either. Especially, the public attacks from billionaire investor Carl Icahn, who has repeatedly accused the board of stopping merger talks with Microsoft, and has pressured to replace CEO Jerry Yang if he wins in the upcoming board elections. Further, some senior executives have announced that they are leaving, including Jeff Weiner, executive vice president of the company's network division and Flickr founders Caterina Fake and Stewart Butterfield.<br /><br />Even before the Microsoft bid went public last February, the company's reputation had been taking a beating for some years. Yahoo has struggled over the troubled introduction of Panama, the delayed technology meant to help Yahoo compete head-to-head with Google in search. To complicate things even more, Microsoft is actively recruiting in Sunnyvale and Yahoo's prestige as a Silicon Valley pioneer has been diminished as a result of recent struggles to regain a competitive edge.Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.com0tag:blogger.com,1999:blog-9082225452790421073.post-73989806346828491712008-06-17T14:01:00.000-07:002008-06-17T14:44:13.760-07:00Internet traffic to increase for online videoCisco Systems Inc. is projecting that traffic on the world’s networks will jump 46% a year from 2007 to 2012. In 2012, Cisco claims Internet video traffic will be a stunning 400x carried on the U.S. Internet backbone in 2000. Video-on-demand, IP-TV, P2P and Internet video will account for 90% of all consumer IP traffic in 2012.<br /><br />The networking-equipment maker, as part of a study called the Cisco Visual Networking Index, predicts that Internet video, which accounted for 5% of data traffic in 2005, will represent 30% of total data transfers by the end of this year. That will swell to 50% by 2012. Behind the trend is the surging popularity of Web sites such as Google Inc.'s YouTube, where users go to watch and share videos. Video already accounts for more traffic than the entire Internet generated in 2000, according to the study.<br /><br />Cisco developed the study to help communications carriers make such plans. In recent years, the rapid growth of traffic has worried some Internet providers, which fear that the torrent of data could block their networks. Cisco prepared the study by collecting data from phone and cable customers as well as market researchers and internal experts. Web-based video is projected to overtake file-sharing as a percentage of Internet traffic in two years.<br /><br />The study also found that Internet traffic is growing fastest in Latin America, followed by Western Europe and the Asia-Pacific region. The upswing in Internet penetration and the increasing number of universities and businesses with high-speed Internet connections will result in Latin America having the highest growth rate through 2012, according to the report.<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhR0suX0rA4Vb45FNd4sy-ULDp5qXutylnw8g3cN31ifcilc-6of6j1uNg93CdUfu29w5imPy0jex4etWj-Blsc75_LdiyG_LW1hFm9QpDxyS_yWetvvmMUD2YjxI4xP7U1RIoA97RvR7M/s1600-h/picture_3_19.png"><img style="cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhR0suX0rA4Vb45FNd4sy-ULDp5qXutylnw8g3cN31ifcilc-6of6j1uNg93CdUfu29w5imPy0jex4etWj-Blsc75_LdiyG_LW1hFm9QpDxyS_yWetvvmMUD2YjxI4xP7U1RIoA97RvR7M/s400/picture_3_19.png" border="0" alt=""id="BLOGGER_PHOTO_ID_5212968965135372322" /></a><br /><br /><br /><a href="http://newsroom.cisco.com/dlls/2008/ekits/Cisco_Visual_Networking_Index_061608.pdf">Cisco Visual Networking Index</a>Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.com0tag:blogger.com,1999:blog-9082225452790421073.post-54799759590496290132007-08-23T22:39:00.000-07:002007-08-23T22:43:06.402-07:00Sprint Nextel Bets on WiMaxToday, Sprint Nextel Corp. announced a move that would change the business model of its wireless operations. On top of selling traditional wireless service to subscribers, the wireless carrier is seeking to give access to the network to other type of products, such as digital cameras and billboards. The early WiMax revenue generated by Sprint will probably come from the subscription model. Longer term, though, the company hopes to make money from advertising. For example, it has a deal with Google Inc. in which more than half of the mobile-advertising revenue from the WiMax network goes to Sprint. It expects to post revenue of $2 billion to $2.5 billion from the network in 2010.<br /><br />WiMax is a wider-ranging form of Internet access similar to Wi-Fi, but it uses licensed spectrum and is considered more dependable. The company has teamed with Intel Corp., Motorola Inc., Samsung Electronics Co. and Nokia Corp. to release 50 million WiMax products over the next three years, which would boost demand for WiMax services. For instance, Sprint could sell service, either as a one-time fee or regular subscription, that would allow consumers to send photos to their home computer from the camera through the WiMax connection. Nevertheless, the 50 million devices expected over the next three years still are light in comparison to Wi-Fi-enabled devices. Roughly 200 million consumer-electronic devices are expected to carry Wi-Fi chips by 2010, according to ABI Research.<br /><br />Sprint’s bet will be expensive, about $5 billion through 2010. Its WiMax network, which it calls 4G technology, would pay off by winning new customers. The network won't just benefit Sprint. Fred Wright, who heads up cellular-network products and WiMax for Motorola, said he sees revenue opportunity in providing consumer devices, modems and networking equipment to support WiMax. In the 2010 to 2012 time frame, the market will be worth "billions of billions of dollars," he said.<br /><br />There is no question that Sprint Nextel needs the help. The wireless carrier has been steadily losing customers over the past several quarters, and only in the recent quarter did it turn itself around. They hope the new brand for the business, Xohm, be powerful enough to put them back on track to compete with AT&T and Verizon Wireless.Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.com5tag:blogger.com,1999:blog-9082225452790421073.post-89959712356257764492007-08-19T19:55:00.000-07:002007-08-19T19:58:40.980-07:00AT&T Brings Video Competition to the State of Nevada<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjj_skfFKWbEr1csvPnc6TQHPfUjK8iGddF1uCWwqPXABmtN1I-8O3zeuZynt4RgqHzR9cSB7FKRYiGyaT4OSXP_A8NwKNJ3lna0Rj6llG8-2Zir63YQeOcmDZ1kWFqFeEpILE1dfFYbus/s1600-h/gwt117068.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjj_skfFKWbEr1csvPnc6TQHPfUjK8iGddF1uCWwqPXABmtN1I-8O3zeuZynt4RgqHzR9cSB7FKRYiGyaT4OSXP_A8NwKNJ3lna0Rj6llG8-2Zir63YQeOcmDZ1kWFqFeEpILE1dfFYbus/s200/gwt117068.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5100611371878133922" /></a><br />AT&T Inc. has announced plans to invest about $100 million over the next several years in fiber network upgrades, further broadband deployment and Internet-based technologies to bring new services, including television, to Nevada consumers.<br /><br />So first, let’s take a look at politics. The investment commitment is the result of the enactment of Nevada Assembly Bill 526, which reforms video-franchising regulations. We congratulate and welcome the decision. The bill brings the benefits of video competition to Nevada consumers by establishing statewide uniform standards that restructure the video-provider authorization process and encourage competition and new investment.<br /><br />"Today's announcement by AT&T indicates that when we create a pro-business culture in Nevada, companies will want to come here not only to do business but to plant the seeds or create investments that will allow them to grow in our communities," said Gov. Jim Gibbons. Ok, enough politics.<br /><br />How about technology? AT&T will be able to deliver competitive video offers and bring several options to consumers. In part, AT&T's new technology upgrades will support Internet Protocol (IP)-based television, high speed Internet access and, in the future, Voice over Internet Protocol (VoIP) services. The infrastructure and investment will be part of a new set of communications and entertainment through the much advertised AT&T U-verse(SM) service. New services, more competition, that’s all good news for customers in Nevada.Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.com0tag:blogger.com,1999:blog-9082225452790421073.post-29914081410279350222007-07-01T22:32:00.000-07:002007-07-01T22:36:24.143-07:00Dobson’a acquisition was easy to spotLast week on this same blog, I wrote about Dobson Communications Corp. exploring strategic options, including the sale of the company (<a href="http://telecom-networking.blogspot.com/2007/06/and-telecom-consolidation-continues.html">see related story</a>). It turned out that all comments on my review on Dobson were right on target. It was pretty obvious it was a happy story for everybody. We foresaw Dobson should sale the company for a considerable profit (especially in these market conditions), whereas any big wireless carrier that would buy them would gain additional cellular coverage without making huge capital investments.<br /><br />Last Friday, AT&T Inc. agreed to purchase wireless carrier Dobson for approximately $2.8 billion in cash. The price represents a nearly 17% premium over Dobson's share price as of last Thursday. Including net debt as of the first quarter of 2007, the total transaction value is approximately $5.1 billion. Some Dobson investors were hoping for a strategic buyer such as AT&T to emerge, betting that such a company could manage a larger premium over Dobson's share price than a potential private-equity buyer.<br /><br />AT&T seemed to be at the right place at the right time. Dobson offers access to markets where cellular penetration is not as high as in major metropolitan markets, thus leaving more room for future growth. And even though roaming partnerships with larger wireless carriers will be difficult to maintain, AT&T expects to save about $2.5 billion through overhead cuts and reduced "roaming" expenses.<br /><br />In the past years, AT&T made several large deals that expanded its wireless and landline reach, such as the acquisitions of AT&T Wireless and BellSouth Corp. However, consolidation in the telecom industry has left AT&T and other large operators with fewer options for big acquisitions. But there are many small wireless and wireline carriers for them to chase. Some observer's on Wall Street have said a broader "roll-up" of such rural carriers could be in store.Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.com0tag:blogger.com,1999:blog-9082225452790421073.post-87017802575273231832007-06-26T22:44:00.003-07:002007-06-26T22:46:59.367-07:00And the Telecom consolidation continues: This time is Dobson<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgi6qgN3-qGs5cvj_RZUJ9sKUNcdZxZDjb_s7ng-wd1tORBpP3CqCPcOHMomnNH0vlnqDUA1zbBknZRMtSTnOtKrHhGPvfkhBXRBUFmzY9fKLDzceMeKASUyoYHJLKofy2K3n7SIzRKAvE/s1600-h/MAG1098.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgi6qgN3-qGs5cvj_RZUJ9sKUNcdZxZDjb_s7ng-wd1tORBpP3CqCPcOHMomnNH0vlnqDUA1zbBknZRMtSTnOtKrHhGPvfkhBXRBUFmzY9fKLDzceMeKASUyoYHJLKofy2K3n7SIzRKAvE/s200/MAG1098.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5080616510443785010" /></a><br />Rural wireless provider Dobson Communications Corp. is considering strategic options, including a sale of the company as deal activity among the telecom industry's smaller players continues to accelerate. The move comes as private-equity firms are increasingly looking for high-profile telecom deals, leading to higher share prices for some smaller telecom companies in recent weeks. In fact, two private-equity firms agreed last month to acquire Alltel, the nation's fifth-largest cellphone company by subscribers, in a deal valued at $26.3 billion.<br /><br />Dobson, based in Oklahoma City, markets wireless services in rural and suburban areas under the Cellular One brand, serving about 1.7 million customers. Last year, Dobson got 22% of its overall revenue through roaming partnerships with major U.S. wireless operators such as AT&T Inc. T-Mobile USA Inc. However, it is becoming more difficult to sustain those partnerships as competition intensifies in rural markets and large carriers build out networks to previously underserved areas. The company focuses in several Midwestern states, parts of the Southwest, Alaska and upstate New York. Lately, it has expanded its reach by acquiring smaller operators. Dobson's competitors include such carriers as Alltel Corp., Rural Cellular Corp. and US Cellular.<br /><br />So, why anybody would be interested in Dobson? For potential buyers, Dobson offers access to markets where cellular penetration is not as high as in major metropolitan markets, thus leaving more room for future growth. However, roaming partnerships with larger wireless carriers will be difficult to maintain. Further, Dobson receives funding from the federal government's "universal service" fund to finance its network build-out in high-cost areas and the FCC is considering a cap on how much carriers like Dobson could receive. That would seriously limit its expansion. In my opinion, this is a happy story for everybody. Dobson should sale the company for a considerable profit (especially in these market conditions), whereas any big wireless carrier that buy them would gain additional cellular coverage without making huge capital investments. More to come for sure.Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.com0tag:blogger.com,1999:blog-9082225452790421073.post-29409143648604307682007-06-22T23:55:00.000-07:002007-06-23T00:36:04.852-07:00Business Week: Back from the DeadToday, I won't be writing anything. I'm simply referring to Business Week's cover story from June 25th, 2007, written by Spencer E. Ante. <br /><br />The article is an in-depth analysis of the bounce-back in the telecom sector after it hit rock bottom in the early 2000s. Not surprisingly, the popularity of IP/Internet-based video is seen as key factor for the telecom resurgence.<br /><br />Very interesting data point from the article: "About half of the Internet's transmission capacity was going unused in 2002. Today that pipeline has almost doubled in size, and yet the unused portion is down to about 30%." Though significant challenges are in front of us, there is plenty of optimism in the market with a lot of growth opportunities, such as IPTV.<br /><br />Enjoy!<br /><br /><a href="http://www.businessweek.com/magazine/content/07_26/b4040001.htm">http://www.businessweek.com/magazine/content/07_26/b4040001.htm</a>Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.com0tag:blogger.com,1999:blog-9082225452790421073.post-51607586928370928202007-06-19T22:55:00.000-07:002007-06-19T23:04:06.143-07:00What is Qwest’s future?<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgumsDFv0syXaasTErZ2jN01U6QYx4XyJA8C2bu98ywHSdyh3MqQskmS6gbTtToHrsuvw9wKhzV8kPWl1NBdPIOTR7sZ-42UTGTzc8fZp67CnofyP0bCHW-H5qFwIj54snaw3U3TF_C_NE/s1600-h/11-06qwestSpiritOfService.gif"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgumsDFv0syXaasTErZ2jN01U6QYx4XyJA8C2bu98ywHSdyh3MqQskmS6gbTtToHrsuvw9wKhzV8kPWl1NBdPIOTR7sZ-42UTGTzc8fZp67CnofyP0bCHW-H5qFwIj54snaw3U3TF_C_NE/s200/11-06qwestSpiritOfService.gif" border="0" alt=""id="BLOGGER_PHOTO_ID_5078023322912261762" /></a><br />Qwest Communications International Inc. CEO Richard Notebaert has announced plans to retire from the company he has run since 2002. He will step down once a replacement can be found. Notebaert took the helmet from Joseph Nacchio, now in prison, while the company was in the middle of an accounting scandal that left it $26 billion in debt. Mr. Notebaert helped Qwest stop the bleeding enough to return profitability. But the increase in earnings has come as a result of a cost cutting strategy rather than a growing business. While the company is certainly far healthier than it was a few years ago, it relies on partners to help it in the key telco growth areas of wireless calling (offered by reselling Sprint Nextel Corp. services) and residential video (offered by reselling DirecTV Group Inc. services). So, what is Qwest’s future?<br /><br />While Qwest's peers AT&T Inc. and Verizon Communications Inc. aggressively pursue their own fiber based video strategies, Qwest has taken a conservative wait-and-see approach to see what customers will end up demanding the most in the future. The company says it’s watching the IPTV pioneers and will continue to experiment with several ways of delivering video services to its customers. Let’s take a look at the four main ways that Qwest sees to reach consumers with video service.<br /><br /><strong>Traditional choices</strong><br />ChoiceTV is Qwest's VDSL-based TV service that passes about 500,000 homes, mostly in the Phoenix area. It's offered over a fiber-to-the-node (FTTN) network with NextLevel hardware and software. Qwest doesn't have any big expansion plans for ChoiceTV. But Qwest does note that an IPTV network is the next generation of a service like ChoiceTV. There are no plans to upgrade immediately but an upgrade would give Qwest the ability to use stronger video compression technologies and more interactive services, as well as offering its own digital video recorder (DVR) service.<br /><br /><strong>Qwest's satellite star DirecTV</strong><br />Throughout most of Qwest's 14-state footprint, the carrier sells an assisted triple play, a voice, video, and data bundle of services, where DirecTV's satellite TV service makes up the video part of the deal. Qwest describes this as a very successful partnership but won't comment as to whether the reseller model is really a big revenue winner for anything other than DirecTV. What it does is give Qwest something to sell to prevent subscriber move to cable. But the relationship may change in the near future, Qwest says, as it could use its DSL connection to homes to provide a video adjunct to what DirecTV beams down from satellites. That is a video on demand opportunity, which would integrate broadband with DirecTV to provide additional integrated capabilities.<br /><br /><strong>Qwest's broadband video plan</strong><br />After a long period, Qwest says it will launch a broadband VOD service available to its customers who have PCs running Windows XP or Windows Vista operating systems. The still nameless service will be co-branded with Microsoft Corp.'s Windows Live platform. Qwest says it will be working on deals with content providers to make free, pay-per-view, downloadable, and searchable video content available through this upcoming service.<br /><br /><strong>What about IPTV?</strong><br />The company says it is preparing to be a "fast follower" in the IPTV space, as soon as it sees the technology and services catch on. Qwest's FTTN expansion will be big, but it will be gradual. And, as such, the carrier isn't saying much about the scope of its plant upgrades. Qwest’s fiber network can provide 20 Mbit/s of bandwidth. Obviously FiOS (Verizon) can provide higher. The question is how much bandwidth do you need? Clearly, Qwest and AT&T both think they can satisfy what the customer demand is. There is some good judgment to the Qwest "fast follower" approach. “If you are sitting on $13.4 billion of net debt like Qwest, you don’t have the luxury of thinking about a massive FTTH deployment", says Heavy Reading senior analyst Stan Hubbard. "And that may turn out to be a good thing from a strategic point of view in the near term, as this whole battle between IPTV and Internet TV plays itself out." Definitely, more to come of this, but I think the IPTV alternative will ultimately be the winner.Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.com1tag:blogger.com,1999:blog-9082225452790421073.post-67168812283541154822007-06-16T01:11:00.001-07:002007-06-16T01:14:55.597-07:00Juniper to launch the T1600<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgAp-2HL9YBWAmWXelZD_eZbgVsv4dwoD2SaAmYG8lMuHhQ6rPcaOSwcmum6Ar8aKq36OHMEI3dzH_Bhf9p0FQYWTFMgfkdiNz6VYGwJgdIA8kgXngxBva9CMuQMoXIdFjMGyP8bUZiWS0/s1600-h/CB066954.jpg"><img style="cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgAp-2HL9YBWAmWXelZD_eZbgVsv4dwoD2SaAmYG8lMuHhQ6rPcaOSwcmum6Ar8aKq36OHMEI3dzH_Bhf9p0FQYWTFMgfkdiNz6VYGwJgdIA8kgXngxBva9CMuQMoXIdFjMGyP8bUZiWS0/s200/CB066954.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5076572491549607522" /></a><br />Juniper Networks plans to sell a new core router, called the T1600, in the fourth quarter of 2007 that will direct Internet traffic for large networks such as telecoms and cable television companies. The T1600 has higher capacity and density than Cisco’s CRS-1, with lower requirements for power and cooling. It will be Juniper's first major upgrade to its core router line-up in five years.<br /><br />It is true that Juniper will likely gain share in the router market in 2008 with a new product due for sale later this year, although rival Cisco Systems will not cede its dominance. Today, most analysts estimate Cisco's market share in core routers to be around 60 percent, compared to around 30 percent for Juniper.<br /><br />No question that this was a much-needed move for the company after it lost share to Cisco's high-end router, the CRS-1, in the past few quarters. Telecoms carriers and cable television companies have been upgrading their networks to handle increasing data traffic, including Internet-based video services, which require advanced core routers. So, Juniper really needed to make a come back in high-end routers if there are in fact serious about competing with Cisco.<br /><br />What’s the real impact for Cisco? Probably, very little. This is more good news for Juniper than negative for Cisco. The T1600 certainly does improve performance. However, any shift in market share is likely to emerge in the second half of 2008 into 2009, and Cisco could also announce some improvements to its CRS-1 in the meantime. Some analysts said Cisco and Juniper will remain leaders in core routers for a while, but there may be more competition ahead from French equipment maker Alcatel-Lucent and smaller firms like Foundry Networks. However, with the heavy investments required to develop such types of core routers, there is modest risk that it would affect market share for Cisco and Juniper.Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.com0tag:blogger.com,1999:blog-9082225452790421073.post-52496061064301126202007-06-16T00:44:00.001-07:002007-06-16T00:47:36.805-07:00iPhone’s launch countdownApple Inc.'s imminent iPhone is quickly rising in the ranks of popularity before it has even hit store shelves. It is almost exceptional that we know so little about a high-profile mobile phone this close to its launch. For now, we know that the 4GB model is priced at $499 and the 8GB model at $599. However, the true price of a mobile phone is a combination of the device's price, the applications it offers and the price of the service contract. <br /><br />For instance, an unlocked expensive phone that features GPS support and VoIP applications can save considerable sums over a period of two years. That's because its users can switch freely to low-cost mobile service providers, substitute it for a dedicated GPS device and use WiFi for long-distance calls. Of course, there are lots of unknowns. How well do consumers factor in long-term cost and substitution? How much do they care about mobile VoIP's cost-saving potential and the ability to switch carriers? At this point, there are no right answers for these questions, just speculations.<br /><br />Apple and AT&T, the iPhone's exclusive distributor, have battled over many issues in their deal. In fact, some of Apple's demands were so unusual that they drove away Verizon, the original choice for the iPhone carrier. Thus, AT&T became the only alternative in the U.S., as Sprint-Nextel and T-Mobile would be too small for a major launch like this. This gave AT&T genuine leverage over Apple and that has likely resulted in some restrictions that may turn out to be controversial. <br /><br />So, what’s the real interest and demand for the iPhone? M:Metrics, which tracks wireless trends, found that iPhone has gained the attention of 56 percent of British and 64 percent of U.S. mobile phone users who are aware of the new touch screen phone. The survey also said that 19 million Americans reported a strong interest in buying the iPhone, and two-thirds of about 11,000 polled are subscribers on other carrier networks. This is an early indication that AT&T's strategy to use the device to attract customers from competitors could pay off. Let’s wait until June 29th to see how this story plays out.Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.com0tag:blogger.com,1999:blog-9082225452790421073.post-50685371811146823762007-06-13T22:47:00.001-07:002007-06-13T22:50:28.835-07:00Here comes Warner Bros.<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiUg5WqHb_-ZGciPaeIIchOiyiO0V_3RbZpgIyWnSiV4N7AABje6Mjl65-ZmI69yjcyLfxFnpY0a02zBuYCasbo-RHa5zx4cAcN8x2lTTikwTk55r7KK4VuSi7jGL7e_4O2W_ZS7BUePc0/s1600-h/BW3600000149.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiUg5WqHb_-ZGciPaeIIchOiyiO0V_3RbZpgIyWnSiV4N7AABje6Mjl65-ZmI69yjcyLfxFnpY0a02zBuYCasbo-RHa5zx4cAcN8x2lTTikwTk55r7KK4VuSi7jGL7e_4O2W_ZS7BUePc0/s200/BW3600000149.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5075793118194140738" /></a><br />Warner Bros. plans to release selected movies to video-on-demand services at the same time they come out on DVD in a test that may probe whether Hollywood can expand one distribution method without hurting another. Today, Warner and other studios already release downloadable copies of movies onto online sales services such as CinemaNow and Movielink on the same day they come out on DVD.<br /><br />The idea seems to be an attempt to influence consumers to rent movies from video-on- demand services rather than from retailers who rent out physical DVDs. Economically, it may make sense. Studios typically keep 15% to 20% of revenue from video-store rentals, compared to 60% to 70% of a VOD rental. So far, so good. But then it comes the tricky part. The studio wants to do that without cutting into the sale of DVDs to consumers, one of its most important revenue streams. In the past, we’ve seen never-ending stories of cannibalizing revenues at the expense of new products, so it’s hard to predict the outcome. However, based on data from several cities which already tested the service, Warner believes it won't cannibalize DVD sales, because the advertising it does for the VOD also boosts DVDs.<br /><br />I think that Warner Bros.’s move into video-on-demand is just the beginning of something much bigger. And that is movie distribution using the Internet. The final result, again, is very difficult to foresee, but without question Warner is heading to the right direction.Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.com0tag:blogger.com,1999:blog-9082225452790421073.post-84126895503401625362007-06-08T23:01:00.000-07:002007-06-08T23:04:07.808-07:00Mike Volpi joins Joost as CEO<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh5nCZlzBXVDds2lQJPaoyyZzFa_XNjvSyifLe7yWAUXNNCNfbwVo-SKVzhv1WZJO_RCfyUOQw14tUxSBq6CxoF7RT3sS0FdKC8IWBw09cNWqsf9L6631Rv5wTAFx564IfA8WOxCjYRgzA/s1600-h/TI.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh5nCZlzBXVDds2lQJPaoyyZzFa_XNjvSyifLe7yWAUXNNCNfbwVo-SKVzhv1WZJO_RCfyUOQw14tUxSBq6CxoF7RT3sS0FdKC8IWBw09cNWqsf9L6631Rv5wTAFx564IfA8WOxCjYRgzA/s200/TI.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5073941145475974706" /></a><br />Mike Volpi, a Silicon Valley executive and former senior vice president at Cisco Systems Inc., was named chief executive of Joost Inc., which distributes television programming over the Internet. Joost, started in January 2006 and based in London, makes software and runs a service that lets makers of content such as television shows stream their programming to consumer PCs equipped with Joost software. Consumers view the shows on the full-screen of a PC and with Joost software can also instant-message and search for content on the service. The Joost service also collects a lot of information about its users, which the company will use to attract advertising. <br /><br />Mr. Volpi comes to the start-up after a 13-year career at network-equipment maker Cisco, where he helped drive an aggressive acquisition strategy in the 1990s that fueled the company's growth. Most recently, he headed the company's $11 billion division that builds network equipment for telecom companies and network providers. The appointment punctuates a boom of new-media companies that are racing to establish businesses supplying video and television content over the Internet.<br /><br />No question Mr. Volpi is ready for the position. Joost has the opportunity to make a huge impact on television; however, it also represents big risks and challenges. Nevertheless, at 40, Mr. Volpi has already proved that he is up to them.Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.com0tag:blogger.com,1999:blog-9082225452790421073.post-50987547278514416982007-06-05T21:49:00.000-07:002007-06-05T21:55:19.235-07:00Finally Private Equity won the battle for Avaya<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEixjDDvjTs3hib-gLtALeMa2w7xsVvqLhj5WZDD4zSJRqnLVlMgdQj-uhm7u7D-Ch_TiSJAO0KgprZbmcQgVw58ruaGdoLA5nzAB0buZQ6DHP4yiGs989sd6qU2SZMC1pP-J2QTFjzRAZQ/s1600-h/F0004254.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEixjDDvjTs3hib-gLtALeMa2w7xsVvqLhj5WZDD4zSJRqnLVlMgdQj-uhm7u7D-Ch_TiSJAO0KgprZbmcQgVw58ruaGdoLA5nzAB0buZQ6DHP4yiGs989sd6qU2SZMC1pP-J2QTFjzRAZQ/s200/F0004254.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5072810061543605794" /></a><br />On Monday, private-equity firms Silver Lake and TPG Capital agreed to pay $17.50 in cash for each share of Basking Ridge, N.J.-based Avaya. The buyout represents a 28% premium above Avaya's closing price of $13.67 on May 25, the last day prior to initial reports about a potential sale. Other companies in the telecommunications-equipment industry, such as Cisco and Nortel, also showed an interest in acquiring Avaya, but the high price offered by TPG and Silver Lake pushed them to the sidelines. Analysts say those companies might eventually renew interest if TPG and Silver Lake succeed in making Avaya more profitable.<br /><br />By going private, Avaya executives say they'll be able to move faster to improve the company and worry less about meeting the short-term concerns of public investors. Yet the acquisition does nothing to diminish competition in what's a very tough market. Avaya has been battling Cisco Systems Inc. for the right to supply corporate customers with Internet-based phone systems. Other major rivals include Nortel Networks Corp. and Siemens.<br /><br />So, what did Silver Lake and TPG see in Avaya that was so attractive? If they can work their financial and operational magic again, the equity firms should be able to reinvigorate the company and perhaps resell it at a profit. However, such a process could take three years or longer. Avaya’s business is very complicated to manage, that’s why equity firms have asked senior management to stay on to run the company. But there will have to do some tough restructuring.<br /><br />First, the new owners have to fix Avaya's lower margin and less predictable service business and reduce the company's 20,000-strong workforce, even though no major layoffs are expected. Secondly, Avaya has to continue to invest significantly to retain its leadership in the corporate phone market. Actually, competition is intensifying in this space as a lot of players are trying to get into it. Aside from operational issues, Avaya and its new owners need to figure out how to generate faster sales growth, boost market share and improve mid-single-digit profit margins. Stronger growth is expected because of an anticipated global upgrade cycle. Corporations want to combine separate phone and data networks into one system to trim costs and take advantage of the new features offered by Internet technology. Let’s see whether management is up and around for the monumental challenge.Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.com2tag:blogger.com,1999:blog-9082225452790421073.post-26809596292988734482007-06-04T22:36:00.000-07:002007-06-04T22:41:21.144-07:00Google: Mobile Strategy in the Works<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjkSbm-yo-SjuVc6xPkioM-PTvRxuzQ7OFf5FQUNcFrJi2DjlW_rvuw9XwU1ujEbFeyhaMcWBNkhHrpQNw8LYa0h4h3YCA90icB17_Hi-Cdxlmco0kz0bfCm5tak9cZXwXw4m2TOcjfb6I/s1600-h/200395282-001.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjkSbm-yo-SjuVc6xPkioM-PTvRxuzQ7OFf5FQUNcFrJi2DjlW_rvuw9XwU1ujEbFeyhaMcWBNkhHrpQNw8LYa0h4h3YCA90icB17_Hi-Cdxlmco0kz0bfCm5tak9cZXwXw4m2TOcjfb6I/s200/200395282-001.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5072450693040014866" /></a><br />Few people could argue that Google is putting lots of efforts and resources to bump up its cell phone strategy. Eric Schmidt, Chief Executive at Google, said the Internet company’s mobile strategy centers on building software applications for cell phones as well as a platform on which other software developers can build. But there is much more flavor on his plain statement. <br /><br />Google's strategy for cell phones has been identified as one of the company's priorities as it tries to extend its services and advertising to the roughly two billion consumers world-wide who use mobile devices. But to be successful, better mobile applications need to come out to the marketplace. In fact, Google is cooperating with telecom operators to develop new mobile applications. They have already discussed bringing such enhanced applications and services to market with at least two of the three major U.S. mobile carriers, AT&T Inc. and Sprint Nextel Corp., and several operators in Europe.<br /><br />Today, Google already offers some mobile applications on a stand-alone basis, such as the Gmail email service and Google Maps. Problem is that they aren't available on all phones and carriers and aren't integrated into a single Google suite of services. Further, the small screen size of phones means that some mobile Internet services must be different from those used on computers, which makes developing new applications even more crucial. A Google's spokesman said the company has talked with handset manufacturers in Asia about putting all its applications into a line of new devices, but he didn’t provide any details. <br /><br />Also, rumors are that the company is building its own operating system to run a suite of mobile-phone services. Even Mr. Schmidt said many more Google mobile applications are in the works. To be sure, the combination of a new set of phones with innovative applications is going to be person-to-person experience with people exchanging videos and other types of data. I still remember the first time I sent out an SMS (Short Messaging System) message from my mobile phone back in the 90’s. With all this new cool technology coming out soon, the experience will be like SMS on steroids.Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.com0tag:blogger.com,1999:blog-9082225452790421073.post-9728271459378487502007-05-30T23:21:00.000-07:002007-05-30T23:30:34.560-07:00Avaya: The Next M&A Target<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhM8K2BukVyUfblxpSq2prl0M2AmTyQs_JLCJ6dJNMR4MwMgoaqm3fm1590MxeIuKzuvL5jIZboOznGolaWsPKFCLSbDvzlKS_SNEB1JW4mUS9Br_nRZYk9vchclcZmqObMXHZVB5F-3-k/s1600-h/ks78746.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhM8K2BukVyUfblxpSq2prl0M2AmTyQs_JLCJ6dJNMR4MwMgoaqm3fm1590MxeIuKzuvL5jIZboOznGolaWsPKFCLSbDvzlKS_SNEB1JW4mUS9Br_nRZYk9vchclcZmqObMXHZVB5F-3-k/s200/ks78746.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5070606640294783570" /></a><br />The telecommunications company Avaya Inc. is in negotiations to sell a part or all of itself, in what may be the latest round of deal making in its industry. Among those interested are two rivals — Cisco Systems and Nortel Networks — and the equity buyout firm Silver Lake Partners. Avaya, based in Basking Ridge, N.J. and valued at $6.1 billion, has retained the investment bank Credit Suisse as an adviser. The company, the one-time business communications arm of Lucent Technologies, and before that AT&T, is one of the nation’s top makers of phone equipment, rivaling Cisco, Nortel and Alcatel-Lucent in providing Internet-based communications to corporations.<br /><br />Of course, this is not a surprise. The telecommunications sector has proved mature for deals recently. Actually, there should be more consolidation in the telecom-equipment industry. The massive consolidation among telecom carriers in the last few years have left telecom-equipment space too crowded, with too many vendors chasing after too few deals. Smaller equipment makers such as Avaya have to do their own deals to compete with their bigger rivals. Last year, telecom equipment manufacturers Alcatel and Lucent merged in an $11.6 billion transaction. In addition, Western equipment makers are facing pressure from low-cost Asian manufacturers, as well as the growing size and purchasing power of a few large phone companies.<br /><br />Why Avaya is an ideal target for private-equity firms? The company has $829Million in cash and no debt; it generates strong and stable cash flows combined with increasing profit margins. The company provides equipment that moves traditional phone systems onto integrated IP network platforms that provide voice, email, conference, IM and video communications. About half Avaya's revenue is derived from long-term service contracts, which ensures even more recurring cash flows.<br /><br />So, why Nortel? First, a Nortel-Avaya deal would be consistent with Nortel’s strategy of increasing focus on enterprise and professional services. In a research report, UBS analyst Nikos Theosopoulos said buying Avaya would give Nortel 30% of the enterprise voice market, as well as more scale in the services business. However, I’m not sure Nortel is ready for such a big move. Despite the progress made by CEO Mike Zafirovski in restructuring the company, there is still plenty of more work to be done and operating costs to be reduced. An acquisition would definitely complicate the situation. On the other hand, Nortel has no choice but to move forward with the deal in order to compete with bigger equipment maker providers, such as Cisco Systems, Inc.<br /><br />The way I see this potential deal is quite simple. Another big wave of consolidation is around the corner in the telecommunications industry. It doesn’t really matter if buyers will be private-equity firms or competitors. It is just the inevitable path for an industry that is becoming more mature.Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.com3tag:blogger.com,1999:blog-9082225452790421073.post-29242021454378978552007-05-26T22:41:00.000-07:002007-05-26T22:43:34.203-07:00What is going on with CableCARDs?<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgjNUNXE1eQJ07aEmjOpQtCyjxB48e2YT29ifyOpnhRbplUkyhrIaRMSakIVvf5FQja-Z4fCTdA0QRbGnlZf-Q3PsrYVKgWO3k2bXRTt1gvZZPd3gDp-wV1bXJnbiOO8lpsFrL9sw1S0u0/s1600-h/GS081012.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgjNUNXE1eQJ07aEmjOpQtCyjxB48e2YT29ifyOpnhRbplUkyhrIaRMSakIVvf5FQja-Z4fCTdA0QRbGnlZf-Q3PsrYVKgWO3k2bXRTt1gvZZPd3gDp-wV1bXJnbiOO8lpsFrL9sw1S0u0/s200/GS081012.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5069111983085840962" /></a><br />CableCARD, which most cable companies must start renting out on July 1 because of an FCC mandate, will let a variety of store-bought devices tune in premium cable channels. Simply by slipping the card into a slot on the back of any enabled equipment, such as a digital video recorder (DVR), a media-center PC, or a flat-panel TV, subscribers can get premium programming. It sounds too easy and interesting.<br /><br />The problem is that cable companies, telephone outfits, and consumer-electronics makers are back at it, fighting over your TV set. The little credit-card-like device could determine how much money these companies collect when viewers in the near future can start downloading most of their premium movies and videos from the Internet. All these companies are throwing in all kind of extras to get you to use their gear, or not use the opposition's. For instance, TiVo Inc. is offering the Amazon.com Unbox movie-download service. Comcast, Time Warner and other cable providers are likely to do everything possible to keep you from buying a competing device at a store. New cable customers have to call them to get a CableCARD, no matter where they plan to use it. And, of course, cable providers are working hard to point to the downside of using separately purchased equipment. Some cable providers may charge as much for a card as you now pay to rent a box.<br /><br />What is more intriguing is that equipment different from Set-Top-Boxes (STB) provided by cable companies such as DVRs and TiVo’s, doesn’t allow cable customers to watch on-demand shows. In fact, cable companies will license software to let such equipment makers offer on-demand and pay-per-view, but only if they agree to display prominently the cable provider's logos, ads, and programming. That's a deal-breaker for many companies that are trying to establish their brand and make money off downloadable content.<br /><br />Makers of DVRs and other gear see CableCARD as the future. It would provide vastly more choices as companies strike deals to allow movies and other content to be pulled directly from the Internet. If that happens, it would be the end of cable. Honestly, I don’t see happening any time soon.Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.com0tag:blogger.com,1999:blog-9082225452790421073.post-35052703597493964962007-05-26T16:52:00.000-07:002007-05-26T21:33:59.275-07:00Cox Communications loves Customer Care<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhYm_zxghUzNrTBGCAi3EMYLk8RMHVDF4iEaZZtYbltxxvoyD8nTdzpEwd6dsBhKGxItD6TZufk2xeSpFv91NT0BqJAFo7vl-HOhqmP7F0E7D11QZis3S54KVcrKPS-urfQXJeGqQv5laQ/s1600-h/105006.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhYm_zxghUzNrTBGCAi3EMYLk8RMHVDF4iEaZZtYbltxxvoyD8nTdzpEwd6dsBhKGxItD6TZufk2xeSpFv91NT0BqJAFo7vl-HOhqmP7F0E7D11QZis3S54KVcrKPS-urfQXJeGqQv5laQ/s200/105006.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5069022712190593586" /></a><br />Today’s discussion is something that I’ve been thinking for a while but never really found a company that sets the example. But lucky for us, the consumers, that might be changing. U.S Consumers generate about $60 billion of yearly revenue just on voice plans. In fact, cable companies have been laying miles of new fiber-optic cable and doing everything they can to steal chunks of that business from the phone giants. However, they haven’t been very successful yet, pulling away just about $5Billion in phone revenues.<br /><br />There seems to be one exception, Cox Communications. They found a formula that works, which is beating phone companies on customer service. On a variety of metrics, from network performance and reliability to billing and cost, customers in several regions describe Cox as their preferred provider. That is a big surprise given the poor reputation that many cable providers have among their own customers. But developing crossover appeal will become increasingly important as the broadband lines blur. Cable companies are offering new phone plans; AT&T and Verizon are launching TV and other advanced video services. Further, Cox, Comcast, Time Warner, and Advanced Newhouse Communications are beginning to sell a wireless phone service, Pivot, in select markets.<br /><br />Let’s keep in mind that phone is the fastest-growing portion of most cable company’s business. For instance, Cox is generating about $1 billion a year from its 2.1 million phone customers, with profit margins of about 50%-60%, with nearly 20% of the homes in neighborhoods where it offers phone service signed up, according to researcher IDC. Conversely, less than 7% of customers in cable giant Comcast's neighborhoods take its phone service. (Cablevision Systems Corp. has the industry's best phone-penetration rate, 29%). On the other hand, phone companies capture 5% or less of their potential TV customers.<br /><br />But let’s get back to customer service. First, Cox uses one customer-care provider, with U.S.-based centers. Second, rather than pushing agents to hurry customers off the phone and causing multiple call-backs, Cox strives to handle issues in a single call and grades representatives on how well they eliminate problems. Third, to avoid confusion, field technicians tap into the same system used by call-center reps. However, performing at the same high level in wireless could be challenging as they will use Sprint Nextel Corp.'s cellular network, which has been overwhelmed with problems after Sprint's troubled integration with Nextel. Also, cell-phone service is one area where consumers seem less eager to switch. So, it will be Cox’s job to convince customers that cable companies can provide wireless service and customer service at the same time.Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.com0tag:blogger.com,1999:blog-9082225452790421073.post-64005565882691943542007-05-25T23:40:00.000-07:002007-05-26T21:38:49.346-07:00And it finally happened: Alltel goes private<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjdCZ-ePgkoifZQ6u2EzqhhTKca3w9qVCXxbfWasZoHvyuIr79BAZ7m4QMcVxmx25nVcgGTHcsjKnXCd-ayV-22J9E7YYoP_fk-Tepzl5dM5taykdyck4m52bnGwlqKIufW4VeG232s-D0/s1600-h/AA028453.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjdCZ-ePgkoifZQ6u2EzqhhTKca3w9qVCXxbfWasZoHvyuIr79BAZ7m4QMcVxmx25nVcgGTHcsjKnXCd-ayV-22J9E7YYoP_fk-Tepzl5dM5taykdyck4m52bnGwlqKIufW4VeG232s-D0/s200/AA028453.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5068756364088699426" /></a><br />On a much expected deal, TPG Capital LLP and the private-equity arm of Goldman Sachs Group Inc., agreed to purchase wireless operator Alltel Corp. for $27.5Billion, in the largest venture of private-equity money into the wireless business. The buyers will pay $71.50 per share for the company, which represents a price of about 10% higher than where the shares traded last Friday. The buyout group will put $4Billion of its own equity, while banks led by Citigroup Inc. will make “equity bridge” loans of greater than $600Million.<br /><br />Now, let’s see the strategy behind this deal. Alltel has 12 million subscribers mostly in the Midwest, West and South. The company became an attractive target after spinning off its wireline unit last year to put more focus on the faster-growing wireless telecom business. From the finance standpoint, Alltel shares trade around 9 times its cash flow, an attractive multiple to private equity buyers who are increasingly paying in the double-digits as competition for deals grows tougher. So far, so good.<br /><br />There are two key points that trouble me a bit. How about the strategic questions that new buyers will face? First, it is unclear how the company will approach the bidding in a coming Federal Communications Commission auction of radio spectrum for wireless broadband communications. This new spectrum and the building out of a new high-speed wireless network would be very costly; however, it might be necessary as larger competitors, such as AT&T, Verizon Wireless and Sprint Nextel are all increasing the speed available on their networks to offer new applications. Up to now, management said the company is willing to invest in its network. However, it seems to be very difficult to predict which direction the company will take, but this is a key fact or to consider moving forward.<br /><br />I think the Alltel deal is just the beginning of a huge wave of telecom deals. Private-equity investors are showing strong interest in telecom companies. Just to mention a few deals, in Canada, Kohlberg Kravis Roberts & Co. and three pension funds have been in discussions to buy BCE Inc. In the U.S., Sprint-Nextel has also been a rumored target during the last month. So, let’s expect more deals and action to come in the always exciting telecom sector.Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.com1tag:blogger.com,1999:blog-9082225452790421073.post-55929451333482521542007-05-19T23:26:00.000-07:002007-05-26T22:08:25.344-07:00Welcome IPTV: Part II<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjCkVEmsrrJPI7KZkXEjqypkqJpXRQgN5MjKYBtUcZopx-NF_zQ0jBpqBt6yBtptVg7rD6M5sS2uQUNvPHFYS1N3eMeQfezT2fRN4GR039H6CoxtzYtdBqZvFUN7QpC8c4YkhTef8J-7rU/s1600-h/ca_50_4.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjCkVEmsrrJPI7KZkXEjqypkqJpXRQgN5MjKYBtUcZopx-NF_zQ0jBpqBt6yBtptVg7rD6M5sS2uQUNvPHFYS1N3eMeQfezT2fRN4GR039H6CoxtzYtdBqZvFUN7QpC8c4YkhTef8J-7rU/s200/ca_50_4.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5066525858722867714" /></a><br />Last month, CBS announced the imminent launch of the CBS Interactive Audience Network: a free, ad-supported network that will digitally deliver CBS programming and third-party content across digital media channels. CBS's ability to partner with leading next-generation interactive platforms is the best way to evolve from a content company to an audience company. The CBS Interactive Network's list of new content deals and online distribution partners in the emerging IPTV space is really long. Included are AOL, Microsoft, Cnet Networks, Comcast, Joost, Bebo, Brightcove, Netvibes, Sling Media and Veoh. Also, CBS previously negotiated content distribution arrangements with Yahoo, Apple's iTunes, Microsoft's Xbox, Amazon's UnBox and others. Mirroring its online strategy, CBS Mobile has concluded direct agreements with the three largest U.S. wireless carriers, AT&T, Verizon Wireless and Sprint, as well as leading next-generation platforms such as Qualcomm's MediaFLO.<br /><br />What about cable providers? Comcast's strategy is to be the company that delivers entertainment, information and media on multiple platforms. The Fan, Comcast's broadband video player, is proving a successful enhancement to the TV experience as well. It is generating more than 80 million video views per month. Further, Comcast was quick to get involved in the DVR (digital video recorder) market. Their DVR is integrated with the digital cable service, which means that in addition to recording their favorite programs, customers have hundreds of channels to watch, and they can choose from more than 9,000 video on demand titles each month, many of which are not available on traditional, linear television. Speaking more broadly, Comcast is focused on developing applications built to take advantage of quad-play digital delivery. These applications will enable customers to receive television content, surf the Internet, make phone calls, and check e-mail or voice mail on multiple devices. They are piloting a new wireless service called 'Pivot' as part of a joint venture with Sprint that lets customers take their integrated home entertainment experience on the go. Through a new co branded wireless device, customers will be able to access TV content, music, video clips and games; access content on home DVRs and program their DVRs; use a single voice mailbox for home and wireless; surf the Internet using Comcast's Internet portal; and e-mail with Comcast e-mail addresses. That is amazing.<br /><br />How about Hollywood? A number of film and tech industry superstars were among the earliest innovators in the digital video technology field, George Lucas' Industrial Light & Magic and Steve Jobs' Pixar notable among them. ClickStar, backed by Morgan Freeman's Revelations Entertainment and Intel, is digitally distributing first-release films by top industry names, as well as exclusive educational and documentary programming, before they hit the DVD and cable markets. A growing number of major studios, cable and TV production companies, including Sony Pictures Home Entertainment, Universal Studios Home Entertainment and Warner Bros. Home Entertainment, have agreed to provide films and programming in what might be viewed at least as partial acknowledgment that ClickStar has the right idea.<br /><br />What about the people? It's the programmers and engineers working away at tech companies, cable and TV networks, telcos and equipment manufacturers who are collectively driving digital media convergence forward. A loose but resilient web of young entrepreneurial companies is playing an outsized role in the process. While companies such as Sling Media are offering new digital TV experiences through TV enhancement equipment and streaming wired and wireless IP services, companies such as Extend Media continue to work on increasingly powerful and flexible delivery platforms for digital content services. For example, the OpenCase solution from Extend Media is not simply an Internet TV distribution technology. The software doesn't simply distribute or push out video: It allows content and rights holders to control, secure, manage and, most importantly, monetize their broadband video assets. That's a key feature set for Internet TV deployments today, whether they make money via direct to own sales, rental, subscription or ad-supported models.<br /><br />So, while threatening established TV networks, cable broadcasters and film studios, the emergence of IPTV and digital video also opens up a new world of opportunity. With more screens large and small popping up all over, people are watching more TV, films and advertising to the point where the danger may lie in over saturation. The battleground is less telco vs. MSOs (multi-cable systems operators), or even telco/MSOs against media and entertainment companies, than a sea change where open IP networks are taking over what was formerly requiring proprietary networks. Content owners and rights holders, as well as retailers, want to carve out a role that reaches the consumer directly without having to go through either Apple and its paid model or Google and its ad-supported model, the two opposing ends of the continuum in the industry right now. There is no question IPTV will be the next big wave in TV, entertainment and media. The big unknown, however, is how established and emerging providers of content and technology figure this entire difficult puzzle out.Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.com0tag:blogger.com,1999:blog-9082225452790421073.post-83041094801518385732007-05-19T23:20:00.000-07:002007-05-26T22:08:39.735-07:00Welcome IPTV: Part I<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg-MXWP-GXfNv8M2384JqpizIH2HDyKEVjUSExqGPtjQKy1AVotZTRviOCEYzDxx0JuC2ehyBSxjAxQCYXTZkK2tQbiDNsSWB4YpeFFap9JmIaK2qHF65MyYnbcaDTMu4XflPSt2anLqHI/s1600-h/ca_23_4.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg-MXWP-GXfNv8M2384JqpizIH2HDyKEVjUSExqGPtjQKy1AVotZTRviOCEYzDxx0JuC2ehyBSxjAxQCYXTZkK2tQbiDNsSWB4YpeFFap9JmIaK2qHF65MyYnbcaDTMu4XflPSt2anLqHI/s200/ca_23_4.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5066525360506661362" /></a><br />There's a new wave of changes headed for the TV and film industries: Television viewers can choose what they watch, when and how they view programs and where they catch up on their favorite shows. That's just the beginning. The interactivity of the Internet, the emergence of DVR (digital video recorder) technologies, easier access to wired and wireless broadband services, and the development of digital network distribution formats for streaming multimedia content are forces that are combining to provide viewers with more choice. The great Internet TV race is on, and the field is crowded and getting more crowded all the time. Welcome IPTV. But with that the TV and film industries are in the midst of a major shakeup.<br /><br />Whether the heat now being generated by IPTV can be maintained depends on the performance of still-evolving digital services delivery platforms. They have to seamlessly manage a huge variety and amount -- and it's still growing rapidly -- of digital video content on offer. Then they must navigate through a maze of networks, wired, mobile IP, 3G and 4G cellular, to reach a broad range of stationary and portable media devices that utilize a variety of proprietary and open standard formats. Not an easy task.<br /><br />There is little doubt that the emergence of interactive Internet and mobile TV offerings poses a threat for established companies and new market entrants all along the respective industries' value chains. Still, there are huge opportunities as well. Equipment manufacturers, distribution partners, content producers, TV networks and film studios are all struggling and experimenting with ways to tap into the rapidly growing Internet TV and film markets and get a handle on how viewers can, and want, to make use of them. Viewers themselves are struggling to come to grips with how to use set-top boxes and portable devices, and figure out which content and services are accessible and affordable.<br /><br />The idea of watching appointment TV is being disrupted by the DVR, which has taken the 'water cooler' chatter out of the mix. Consumers now watch what they want to watch, when they want to watch it. Technologies like Slingbox from Sling Media take that a step further by giving consumers the ability to watch TV not only when they want to, but also wherever they want to. The interactive nature of IPTV, as well as the unsettled state of devices, formats and standards, stands in severe contrast to the passive nature of traditional TV viewing. Social networking sites such as YouTube have demonstrated the potential for interactivity to attract viewers and drive network traffic.<br /><br />The key technological drivers pushing IPTV viability are high-speed bandwidth, powerful hardware, evolved codecs and DRM (Digital Right Management). There are numerous technical hurdles in the path toward widespread IPTV adoption, including the variety of consumer software and hardware options, the rapid proliferation of viewing devices, and the need to establish links between multiple vendors. But the major challenge is really about defining a business model that works. That's why just about every media and entertainment company is experimenting with Internet TV-related applications. The market is uncertain which models for delivery will prove profitable and sustainable: download, rental, subscriptions, ad-supported, or some combination of the above. This has created the need for companies like Extend Media that can supply and/or stitch together the many moving parts required to deliver these services. However, it's emphatically clear that IP-based distribution, instead of proprietary networks via satellite or cable, is now a viable video distribution mechanism with the potential to eclipse all other methods in the future. Refashioning and re-engineering themselves to deliver programming to fragmenting mass markets that are getting comfortable with various new media channels has not only led established players to ally themselves with numerous new content and distribution partners, technology providers in particular, but also to rethink their business models and devise new ones suited to the nature of digital channels.<br /><br />On my next blog, we will discuss how different players are pushing IPTV in very diverse ways.Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.com0tag:blogger.com,1999:blog-9082225452790421073.post-75115200127039110952007-05-16T20:56:00.001-07:002007-05-16T21:46:07.051-07:00AT&T Move into Advertising<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiZ5lh4kDsqzQB5gyMqZiktdZFg3CKA-lFRMI50potRHrFKZYAXp7Ol61faxaCyiz8542qbmYC_JNszoGF12MnI1z1VQLk53MkLsearjRAQVS-ap15lPDVAxgP-F9DgisLAMXOLrCKiRQI/s1600-h/BRI030.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiZ5lh4kDsqzQB5gyMqZiktdZFg3CKA-lFRMI50potRHrFKZYAXp7Ol61faxaCyiz8542qbmYC_JNszoGF12MnI1z1VQLk53MkLsearjRAQVS-ap15lPDVAxgP-F9DgisLAMXOLrCKiRQI/s200/BRI030.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5065386322294860258" /></a><br />Believe it or not, AT&T is now thinking about advertising. Who would have thought 10 years ago that the company would put out a press release expecting targeted advertising related to its video and wireless services to become a billion dollar business in the next three years? No question that times have changed and AT&T must look for any additional source of revenues to keep up with the coming competition from OTT (Over-The-Top) providers, such as Google, Yahoo and Microsoft.<br /><br />Let’s spend some time on this. Point taken, AT&T's combination of being the largest U.S. broadband Internet provider, a wireless carrier and its nascent U-Verse video service delivered over broadband networks provides it with a unique opportunity to sell advertising. The company thinks there is a good opportunity in advertising especially given the assets their business has available, such as lots of wireless subscribers and their latest move into TV.<br /><br />Further, AT&T plans to spend over $6 billion to build out the infrastructure for U-Verse, which started rolling out last year over high-speed fiber-optic networks. The service will be built on top of Microsoft Corp. Internet protocol television (IPTV) platform and will be available to 18 million homes in 13 U.S. states by the end of 2008. Expectations are very high as the company believes the U-Verse service will allow advertisers to better target customer interests and explore new interactive ways to TV watchers because it runs on top of an Internet network. The final piece of the puzzle would be to find a partner to sell and serve advertising over the IPTV platform to consumers. Even though Microsoft will be providing the IPTV platform, it is still premature to say that they will be the preferred partner that AT&T is looking for, especially as they trail Google Inc. and Yahoo Inc. in Web advertising sales.<br /><br />Bottom line, AT&T move into advertising makes absolute sense. They have the infrastructure, the strategy, the money and the strength muscle to make this business succeed. I wonder, however, whether they would be able to compete with experienced advertising powerhouses already out there, which started out from scratch and learned to compete against Over-The-Top providers. There will be some learning curves and mistakes on the way, but I think AT&T has what it takes to generate that $1Billion in the next three year. Time will tell.Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.com0tag:blogger.com,1999:blog-9082225452790421073.post-91072269279899734572007-05-16T20:04:00.000-07:002007-05-16T20:05:11.049-07:00Executives on the Move<strong>Cisco Systems</strong><br />Vince Hassel was named chief financial officer of Linksys, a division of the company. Mr. Hassel joins from Flextronics International Ltd., where he was vice president of finance for the components division. <br /><br /><strong>3COM</strong><br />Jay Zager was named executive vice president and chief financial officer of the voice and data networking company, effective June 23. Mr. Zager, 57 years old, will succeed Don Halsted, who is leaving to pursue other opportunities, but will serve as an adviser during the transition. Mr. Halsted, 50, couldn’t be reached to comment. Mr. Zager joins from Gerber Scientific Inc., where he was executive vice president and finance chief.<br /><br /><strong>Verizon Wireless</strong><br />The operator of the nation's most reliable wireless network and leader in customer loyalty, has named William (Bill) Spargo to the recently created position of director of Data Sales for the New England Region. In this role, Spargo is responsible for leading and training Verizon Wireless' consumer and business sales teams on mobile productivity solutions like BroadbandAccess wireless Internet service, and VZ Access mobile email solutions. Spargo will be based in Meriden, Connecticut. Mark Harris has been named director of Retail Sales and Operations for Southern New England to replace Spargo.Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.com0tag:blogger.com,1999:blog-9082225452790421073.post-12273192581852028062007-05-12T15:34:00.001-07:002007-05-12T15:37:31.493-07:00What is going on with Alcatel-Lucent?Alcatel-Lucent reported earnings on Friday. It was its first full quarter since it completed the merger and results were somehow disappointing. Company is still struggling itself after the recent trans-Atlantic merger and that continues to cause big troubles. Further, slump in wireless revenue, which fell 15% to €1.2 billion ($1.62 billion) from a year earlier, is creating new headaches as they now face a new threat to its business. So far, problems are coming from more competition in emerging markets such as India, Russia and Africa as well as rival Swedish firm Telefon AB L.M. Ericsson, which is very strong in wireless equipment and GSM technology.<br /><br />So, let’s focus on the wireless sector for a moment. Alcatel-Lucent launched a new base station during the first quarter, which seemed to cause some orders decline in anticipation of the new product. Also, the company walked away from several bidding processes for wireless-equipment contracts due to competitive pricing pressures, in particular in Latino America. No customers or specific projects were mentioned and not much detail was given either. I find really hard to believe that one single region of the Emerging Markets world has caused such an impact on the wireless business, especially when the company never really focused on that region.<br /><br />I’d like to also comment on some of the reasons why the two telecom-equipment makers first merged. In theory, they announced the merger as response to increasingly competition in the telecom-equipment business, especially from low-cost manufacturers in China. The combined company would deliver €1.4 billion in annual cost savings by 2009, by cutting 9,000 jobs, merging research and development, and trimming redundant products from its portfolio. It looks like Alcatel-Lucent is still on track to deliver the expected €600 million in synergies in 2007. Layoffs, which will account for about half of the cost savings, have already begun at U.S., Asian and European offices. However, there is a lot of room for improvement and progress seems to be very slow. It will be interesting to keep track of this part of the story.<br /><br />Bottom line, I still can’t figure out what’s going on with Alcatel-Lucent. Company continues to struggle and I don’t really see an understandable path for recovery. I still remember two or three ago when I thought they were in the best position to beat Cisco. Clearly, it hasn’t materialized and in fact, I think they have already missed the train.Martin Galparsorohttp://www.blogger.com/profile/02363581404920567344noreply@blogger.com3