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Cisco taking on Nokia/Alcatel/Ericsson, sees cloud/white-label as top threat

  • John Chambers (CSCO): "We do everything in wireless except for the radio ... Now, we have a creative idea there, and I’ve just funded our first startup to see if that works ... The market is ripe for a new player."
  • Chambers won't name the startup, but his remarks suggest Cisco plans to directly take on Ericsson (ERIC), Nokia (NOK), and Alcatel-Lucent (ALU) in the giant mobile base station market. Cisco recently bought small cell base station vendor Ubiquisys, and also sells switches/routers and management software to mobile carriers, but until now has argued the core base station market is too commoditized.
  • Separately, Chambers predicts "IT as a service and white label will be [Cisco's] biggest competitors three to five years out." That's a reference to cloud infrastructure providers (none larger than Amazon), who often rely on cheap white-label switches, as well as the use of similar hardware from Web giants such as Facebook and Google.
  • Chambers also: 1) Insists Cisco's storage alliances with the likes of EMC and NetApp (NTAP) will stay in place, in spite of the Whiptail deal. 2) Predicts Cisco's upcoming Insieme switches will help it compete against private Arista. Arista, whose high-density switches use 3rd-party silicon (unlike Cisco's), could do a huge IPO next year. 3) Questions the scalability of the software-defined networking platform offered by VMware's (VMW) Nicira unit (generally seen as a threat), and claims Nicira has less than $10M worth of deployments. Of course, the value of the switches managed by Nicira's products could be much larger.
  • Previous: Cisco lower, Chambers cautious about macro trends
Comments (11)
  • JoseV
    , contributor
    Comments (405) | Send Message
     
    Another reason why a merger of Nokia with Alcatel-Lucent makes sense. The merged firm would be more than a match up for Cisco or Eriicsson.
    28 Sep 2013, 02:48 PM Reply Like
  • Randal James
    , contributor
    Comments (3074) | Send Message
     
    Jose

     

    One might think that but there is caution to be seen here as well. ALU is only 1/5th the size of Ericsson. ERIC is 1/3rd the size of CSCO.

     

    CSCO, being so broadly based, is solidly profitable. ALU, ERIC & NOK are not though NOK would be without the device business being sold to MSFT. Huawei is roughly the same size as Ericsson and is (was/is?) profitable. Sometimes it makes sense to combine two smaller companies together to compete more evenly with a bigger company. Car rental firms and airlines come to mind though the latter are so rarely successful long term.

     

    At other times, it might make sense to wait out a competitor until they get bored with losing money and quit, as Siemens did. Net of cash, that didn't really cost Nokia anything they didn't instantly get back in assets they needed to run a stand alone.

     

    It is annoying that CSCO would choose to enter this market as their clout will help influence sales and whatever share they take will be painful for all the other parties. Rather than combine with a modestly weak Alcatel, my inclination would be to prepare for a fight and hope everyone else suffers more than Nokia.
    28 Sep 2013, 03:46 PM Reply Like
  • JoseV
    , contributor
    Comments (405) | Send Message
     
    Cant disagree with you on current profitability of the firms but the combined knowledge of NSN and Acatel-Lucent will never be caught up to by Cisco who would be just entering this market. YI agree with A HOPF. Chambers doesnt know what he is getting into. Again, no match up between ALU-NOK and Cisco.
    28 Sep 2013, 05:38 PM Reply Like
  • Andreas Hopf
    , contributor
    Comments (9738) | Send Message
     
    Usually, when John Chambers talks, CSCO tanks...

     

    Over the last five years, he has been touting this and that and basically, not much has happened, if anything at all. I would rather believe, knowing where Huawei, Ericsson, Alcatel-Lucent and Noka are going in force, he felt the need to remind shareholders of Cisco's existence. On a down day, his talking directed at Alcatel-Lucent and Ericsson did not make much of a dent.

     

    With Nuage Networks, Alcatel-Lucent has a superb SDN/NFV war-horse and Huawei's new SoftCom strategy is going to be one to watch as well. I cannot see Cisco immediately making sustainable forays into markets that only on a surface level seem adjacent to their core business.

     

    If anything, I would immediately buy Huawei, were they ever IPO'ed, but as long as Ren Zhengfei reigns, it won't happen.
    28 Sep 2013, 04:51 PM Reply Like
  • WisPokerGuy
    , contributor
    Comments (941) | Send Message
     
    John Chambers is a corporate leader who has managed to lead Cisco absolutely NOWHERE. Cisco has been the absolute definition of "dead money" for the last decade (or more). How this guy keeps his job amazes me? He's worthless.
    28 Sep 2013, 05:12 PM Reply Like
  • DWD Investing
    , contributor
    Comments (9194) | Send Message
     
    Here is something to think about:

     

    "Analysts put the value of Alcatel's wireless business at between 1.1 billion euros to 1.5 billion euros.

     

    A combination with Alcatel-Lucent would increase NSN's market share in the global wireless infrastructure market from 18 percent to more than 30 percent, leapfrogging Huawei and closing in on Ericsson, according to analyst data."
    http://reut.rs/15C94Md

     

    If that deal can work, it would be a great, great deal at 1-1.5B for Nokia.
    28 Sep 2013, 06:06 PM Reply Like
  • JoseV
    , contributor
    Comments (405) | Send Message
     
    Disagree on the price, would be much more.
    29 Sep 2013, 03:35 AM Reply Like
  • scabalqu
    , contributor
    Comments (264) | Send Message
     
    Why should Nokia NOT buy ALU?

     

    1) Nokia's technology solutions are NOT compatible with ALU.
    2) Nokia is light-years ahead of ALU's marketing capabilities.
    3) Nokia has structure, discipline while ALU is all over the map.
    4) Nokia should not buy ALU's current debt load of $7 billion
    5) ALU's current $8.3 Billion valuation is based on mere market speculation -- NOT the technological or market capabilities of ALU.

     

    Bottom line: Nokia does not need ALU's problems, market share or extremely thin margins of 2.3%.
    29 Sep 2013, 01:51 PM Reply Like
  • JoseV
    , contributor
    Comments (405) | Send Message
     
    Your reasons for not buying ALU sound more like Nokia of a few months ago!
    29 Sep 2013, 04:10 PM Reply Like
  • mKiwi
    , contributor
    Comments (694) | Send Message
     
    I would rather see the MSFT deal fall over than NOK buying ALU. The old NOK had diverse income streams. I hope they don't concentrate a disproportionate amount of their business in one area such as wireless network infrastructure.

     

    I believe NOK have to consolidate their 100% holding in NSN first before taking on ALU's problems.

     

    NOK has undergone major changes in the last few months and I believe they should take a step back to consolidate their position before advancing into another enterprise.

     

    They will have a large war chest after the conclusion of the MSFT deal and I hope they don't feel the need to rush into a new enterprise straight away.

     

    I would rather see them using their war chest to aggressively peruse licensing agreements relating to their IP portfolio. Reading the many articles on SA it appears that there are potentially billions of dollars in licensing fees outstanding relating to their IP portfolio.

     

    I believe Nokia should concentrate their entire effort in extracting the maximum benefit from that IP portfolio while the portfolio has a reasonable average live expectancy.

     

    I believe they should concentrate their effort into exploring monetising of HERE before they take on ALU.
    29 Sep 2013, 07:20 PM Reply Like
  • scabalqu
    , contributor
    Comments (264) | Send Message
     
    NOKIA should consider themselves lucky for selling their albatross "smartphone" business at a moderate premium to Microsoft.

     

    Take the money and run -- and don't look back, NOKIA. And count your lucky stars.

     

    NOKIA should make sure that it was a "lessons learned" moment. Don't rush to get into any new business relationship (e.g. ALU) until you get your house in order. Focus on your strengths, your structure and your products.
    29 Sep 2013, 08:13 PM Reply Like
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