If a buyout deal was truly in the works between Alcatel-Lucent and Nokia for a while now, as certain folks have retroactively predicted in recent hours, then the timing of yesterday’s deal announcement came as a shock at least to some at Alcatel-Lucent.
The French global telecommunications equipment company had every intention of launching a new communications-as-a-service cloud platform called Rapport, speaking about it with CMSWire in depth.
Now the word CMSWire has been given to describe this launch is “delayed.”
Not “cancelled,” which is a positive signal for A-L employees who may very well still be in shock over yesterday’s merger news.
As the deal is presently structured, Nokia Oyj, a Finnish multinational communications and information technology company, plans to make Alcatel-Lucent a share-swap offer of just over half a Nokia share for every A-L share.
Nokia estimates the transaction value of the swap to be 15.6 billion euros (presently about $16.6 billion). Executives claim this offer represents a 28 percent premium over A-L’s weighted average share value over the past three months.
Financial analysts are predicting, however, that quite possibly by the time the deal is approved by French, Finnish and US regulators, the declining value of the dollar will have knocked off another billion dollars, making the valuation in both euros and dollars nearly equivalent.
“The drivers of the changes we are seeing in the world around us and the demands being placed on the networks of the future are increasingly complex,” stated Nokia President and CEO Rajeev Suri during a press conference yesterday. Suri will remain at the CEO position of the combined company.
“Demand for seamless and ubiquitous access is combining with ever-increasing requirements for network analytics and network intelligence,” Suri continued. “This is requiring broader, deeper, and more sophisticated end-to-end capabilities which very few companies can offer.”
'The Shift Plan'
You could say that Alcatel-Lucent Chairman Philippe Camus was conditioning his company for exactly this transaction (maybe it shouldn’t have been a shock after all). In April 2013, Camus brought in Michel Combes, previously the CEO of Vodafone Europe, to lead A-L.
Right away, Combes implemented what came to be known within A-L as “The Shift Plan.” Essentially, the plan boiled down to a refocusing of all A-L’s efforts, including its Bell Labs research, toward Internet Protocol networking.
“When I joined Alcatel-Lucent two years ago,” Combes admitted to reporters Wednesday, “the group had come very close to bankruptcy, threatened by serious financial and operational weaknesses. The emergency and priority was to put the group back in the game and provide it with a true industrial project. This was the purpose of the Shift Plan.”
Shift’s first step was focused, he said, on taking immediate steps to avoid bankruptcy, fix the balance sheet, and restore operational efficiency. Step two was giving the team something to do: the move to what Europe calls 5G technology (that term means different things on different continents).
European 5G is not just the mobile transmission technology, but also its IP-based networking infrastructure and its cloud server platforms. That project, Combes said, put A-L back in a growth pattern.
The Big Deal
Brendan Ziolo, Alcatel-Lucent’s head of large enterprise marketing, explained more about step two of the Shift Plan to CMSWire during our Rapport discussion. “We did have a division called Alcatel-Lucent Enterprise, that was fairly focused to the enterprise market. But we sold off that division late last year.
“Just because we sold off the enterprise division doesn’t mean we are not doing that anymore,” continued Ziolo — again, prior to the final merger announcement.
“We’re very much changing our strategy, so maybe ‘incremental’ is the right word [for it], but it’s a bit more in that we’re changing our strategy, in terms of our approach to the large enterprise market. We’re going there with a different suite of products now than we would have in the past.”
Ziolo explained that A-L created a new direct sales team whose focus would be to sell communications services to large enterprises, such as manufacturing and retail. The company’s old Enterprise division had been selling PBX systems Wireless LAN switches, and targeting smaller customers as a way to distinguish itself against networking appliance leader Cisco.
“With our new focus,” Ziolo continued, “we are targeting very large enterprises, and the types of solutions we are taking there are about helping banks, hospitals, etc., leverage the cloud and Web-scale IT, and other trends taking place in the market today.”
The Airbus Model
Step three of the Shift Plan was... well, this.
Compared to Alcatel-Lucent’s strengths in cloud and infrastructure technologies, its weakness was in mobile, its CEO told reporters. As a colleague once joked to me, the word “Nokia” derives from the ancient Klingon word for “mobile.”
Wednesday, with the aid of charts, Nokia CEO Suri presented his estimate that the combined company would have strengths that Nokia did not have by itself, especially in cloud and analytics.
Nokia had been trying to catch up in the IP networking field through partnerships, including one in late 2013 with Juniper Networks.
Rapport, or whatever it ends up being called, was not mentioned by name during yesterday’s press conference. But it was directly implied, as Nokia’s Suri characterized A-L’s cloud as one of its crown jewels, making statements indicating that Nokia wants those large industry customers.
Bringing businesses together from separate countries that sold the same products on paper, but not really in practice, has been the goal of A-L’s Philippe Camus once before.
Airbus is the European giant aircraft manufacturer — the culmination of aircraft production assets from Spanish, German, and French companies, brought together under the direction of Camus.
As Bloomberg Business pointed out Thursday, Camus already knows how to produce juggernauts. If the success of Airbus provides us with a prelude, Nokia’s next movement could become positively symphonic.