Newbridge Networks has finally succumbed to the advances of a telecoms company. Siemens and Ericsson were both rumoured to be interested in the asynchronous transfer mode (ATM) manufacturer, but after a long courtship Alcatel finally bought the company for $7.1bn (£4.4bn).
Analysts say that Newbridge will be a good fit for Alcatel and will bolster its digital subscriber line (DSL) and ATM technology portfolio, which are seen as the underpinning technologies for next-generation telecoms services.
Neil Rickard, a networking research director at the GartnerGroup, said Alcatel must now prove that it can create an integrated company with a full product range.
"If Newbridge had not been acquired, all it would have been able to do is hold on to a small niche of the operators market. Newbridge lacked a full Lan/Wan portfolio and this was apparent before the acquisition. Newbridge had good pieces, but not a true integrated portfolio glued together with compelling features," said Rickard.
Pim Bilderbeek, vice president of networking research at analyst IDC, said: "This is a sensible deal for both companies because Alcatel will get access to ATM Wan switches where it isn't strong.
"ATM isn't going out of fashion because it is still a big part of service providers' plans to install it in their networks. By 2003, it will have grown from a $4.5bn market to a $8bn market.
"It's good for Newbridge because it was too small for big customers and too big for the small guys. Newbridge needed a strong partner and the Siemens relationship wasn't really going anywhere."
Maintaining old alliances
While Bilderbeek predicts that Newbridge and Alcatel customers will not be adversely affected by the deal, he said: "It's likely that Siemens will now scrap its deal with Newbridge because it is head to head in competition with Alcatel. Siemens sales provides 10 per cent of Newbridge's revenue, so Newbridge will need to think about how to deal with this loss."
Rickard was even more adamant. "The Siemens/Newbridge/3Com deal is over." If the alliance were to be severed, users' support contracts could be in jeopardy. Siemens, which was also believed to be in the running to buy Newbridge, has sought to reassure users that they will not be left stranded by the Alcatel deal.
Siemens said that Alcatel chief executive Serge Tchuruk had assured the German company that the four-year old relationship would remain intact.
Volker Jung, a member of Siemens' managing board, said: "Tchuruk wants to continue the co-operation between Newbridge and Siemens. In today's world, a company is a partner in one market, a customer in another and a competitor in another."
Newbridge and Siemens formed their alliance in 1996 with the initial intention of jointly developing and selling ATM technology.
They have extended the deal to other areas, including IP virtual private networking, and boast customers such as Global One and Deutsche Telekom.Andreas Dohmen, Newbridge's executive vice president, said: "It will be our number one priority to keep up the relationship with Siemens. The company has already told me it is still interested. There's no reason why it shouldn't be."
Continuing support for users
One user with a particular interest in whether the Siemens/Newbridge relationship will hold is Pembrokeshire Council, which has a heavy investment in Newbridge technology that was supplied by Siemens Network Services. The local authority has been buying Newbridge kit for the last five years and two months ago invested in remote access kit from Newbridge, as it planned to become an ISP.
Tom Williams, head of IT at the council, said it still needs the same level of support from Newbridge and Siemens Network Services as it had in the past.
"We've had good support from Newbridge. It's nice to have someone nearby and I would be concerned if they decided to reduce support at Newport," said Williams."
Newbridge assured that the deal would increase support. "We needed this deal because we were struggling to put enough feet on the street for project management and deployment of products in different countries," said Dohmen. "This is why we had to restructure and make redundancies last year."
"It's good news for our customers because it's all about scalability. There is almost zero product overlap so customers need not worry about products being canned as a result of the takeover."
Complementary customer base
Newbridge was expecting to sell more than $1bn worth of networking equipment this year - that figure is now expected to rise to $2.5bn. The companies also have a complementary customer base and strong product links, particularly in access technology.
"We are making a major move to become a worldwide leader in new-generation networks," said Tchuruk. "The acquisition combines our position in fast internet access with Newbridge's strong ATM multi-service capabilities."
Alcatel had already bought three other US companies - Xylan, Packet Engines and Genesys - and created the Alcatel OmniPCX 4400 range that replaced voice-only exchange systems and allowed data and voice over the same network.
As Alcatel's latest acquisition, Newbridge will be merged the company into Alcatel's data carrier division. However Steve Byars, principle analyst at Current Analysis, said Alcatel is still a long way from being a major player in the market even with Newbridge on board.
"This is not the masterstroke that will put Alcatel into the top three," he said. "The footprint Newbridge has in international markets does add value, but it does not have a strong market presence in the US, so Alcatel is not closer to dislodging Lucent or Nortel."
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