Plan of Alcatel-Lucent to exit enterprise business makes sense

After Cisco, Wipro and Infosys, Alcatel-Lucent is the latest company to announce plans to restructure its enterprise business.

A possible exit from enterprise business is important as the global enterprise solution segment is not doing well.

According to In-Stat, enterprise business spending on IT and telecom services – cloud computing, wireless, wireline voice, wireline data, and business IP/VoIP – is expected to increase by six percent in 2011.

Alcatel-Lucent is in talks with companies to explore strategic options to enhance the future opportunities of its enterprise business.

Prospective buyers include European private equity firm Permira which has put up an offer of $1.3 billion, as well as a host of competitors like Avaya, Cisco, HP, Siemens Enterprise Communications (SEN), Microsoft and Ericsson.

The company began considering a sale or IPO of the business in April this year, as it was expected that the business was liable to fetch close to $2.1 billion. The enterprise business already generates 1.4 billion Euros annually for the supplier. 

In 2010, Alcatel-Lucent reported global sales of 16 billion Euros. It also reported a Q1 profit of 15 percent in 2011.

The Alcatel-Lucent Enterprise business includes enterprise Ethernet switching, IP telephony, Bell innovation labs and contact center operations – most important of which is the Genesys contact center software business, which contributes a large part to the revenue for the enterprise business unit.

In recent years, the enterprise business has been facing stiff competition from top market players like Avaya, Cisco, Wipro and Infosys, especially for switching, IP telephony and managed services. If Alcatel-Lucent hives off its enterprise business to any one of these competitors, it stands to lose a great deal, with the enterprise unit and Bell Labs being the most profitable part of the company.

Wipro, Cisco, Avaya and Infosys have each made changes to their enterprise business in recent months – be it from cutting down on staff to restructuring and reshuffling top management, which has seen them reap added profits. Perhaps similar changes to Alcatel’s enterprise unit could provide it with a much-needed shot in the arm, enough to reconsider abandoning one of its greatest assets.

The exit from enterprise business will be important for Alcatel-Lucent as it can focus more on its wireless business. In many countries, its competition Nokia Siemens Networks and Ericsson are doing well in the wireless business.

During the fourth quarter of 2010, revenues for the wireless division were Euro 1.156 billion, an increase of 44.5 percent from the year ago quarter. Strong growth continued across the wireless portfolio, with 56 percent growth in its W-CDMA business, 32 percent growth in CDMA and 14 percent in GSM.

Alcatel-Lucent is keen to give more thrust on LTE business as well.


Revenues of its enterprise applications business increased 4.1 percent over the year-ago quarter, reaching Euro 330 million in the fourth quarter. The data networking business continued its good double digit growth and included initial revenues for our new 10-Gigabit Ethernet switch launched one quarter ago.

Genesys, its customer contact center software business returned to growth in the quarter. Full year Enterprise applications revenues increased 3.0 percent as gains in these two segments offset decline in voice telephony revenues.

Many telecom equipment vendors are in the race to buy Alcatel-Lucent’s enterprise business. We expect more transactions in the enterprise business segment.

By Beryl M

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