Alcatel-Lucent Offers Enterprise Division to Highest Bidder.

by Jeff Wiener on April 28, 2011

In what could be a selloff that shifts the balance of power in the global telephony market, it looks like French telecommunications company Alcatel-Lucent is shopping its enterprise switching, IP telephony and contact center businesses in an effort to reverse its fading financial fortunes.

As expected, the potential selloff of Alcatel-Lucent’s enterprise division is drawing market predators both large and small, as everyone not only smells blood in the water, but money to be made as well.

But with the expected price of Alcatel-Lucent’s various enterprise services looking to fetch a price somewhere in the area of $1.2 billion, who can really afford to be a serious competitor in this selloff?

To that end, according to Reuters Alcatel-Lucent will be holding meetings in San Francisco this week, with prospective buyers likely to include Cisco, HP, Avaya, and a private equity firm by the name of Gores Group, who owns a majority stake in Siemens Enterprise Communications.

What remains to be seen is who will win the next great telecom prize?

In the era of mergers, it should be noted that not every partnership is a match made in heaven. Since the deal that created the union between France’s Alcatel and the U.S. telecommunications equipment company Lucent back in 2006, the company has struggled to find a solid financial foothold, seeing the value of the merged company steadily decrease over the past few years.

Therefore, in an effort to reduce costs and bolster its financial outlook Alcatel-Lucent is scaling back its services, choosing instead to better focus on its core markets. While such reprioritization can often set a company back on the right financial path, there have been countless examples in the tech and telecom markets where such selloffs are but the beginning of the end for struggling firms.

But what will such a selloff mean to the other big players in the telephony game, or more to the point, is there anyone that would want what Alcatel-Lucent is selling? For any potential buyer the prize is less than impressive, as the French telecom company has been increasingly stagnant in the cutthroat markets of Ethernet switching and IP telephony.

In regards to the former, Alcatel-Lucent controls a piddling 1.5 percent of an Ethernet switching market worth around $18.7 billion, placing it around 8th or 9th in the world. In regards to the latter, Alcatel-Lucent occupies the respectable fourth place in the global IP enterprise telephony market, with an 8.9 percent share of the market’s $12 billion profits. The only problem there is that that number is down from 9.9 percent only three years ago, while market leaders Avaya and Cisco disappear in the distance as fifth place NEC storms into view.

That being said, there will certainly be some companies interested in Alcatel-Lucent’s relatively new line of enterprise and data centre switches and then of course there’s the ever-present desire to remove a competitor from the market; whether or not either of those reasons are enough for anyone to take a $1.2 billion gamble on the French company remains to be seen.

For the right company, however, Alcatel-Lucent’s enterprise division may be just the thing, helping established companies further their global reach or perhaps assisting a dark horse candidate to break into the market.

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Written by: Jeff Wiener. Follow by: RSS, Twitter, Facebook, or YouTube.

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