“CSCO + LU = DEATH OF NORTEL” — Yahoo! Message board
RESEARCH TRIANGLE PARK — Reseller agreements come and go, so many in fact that they become rather ho-hum.
But once in a great while a deal is announced that causes even jaded journalists to say, “What?”
That was the reaction in many quarters Tuesday morning when Lucent Technologies announced it had signed a multi-year reseller agreement with Cisco to offer some of Cisco’s cutting-edge wireless technology.
How long before Ford puts Corvettes in its showrooms?
How long before Bank of America offers CDs from Wachovia?
The reaction certainly was quick on the message boards at Yahoo! Some immediately touted the deal as death for Nortel. Wall Street took a calmer, longer view. In fact, stocks of all three networking giants closed up for the day. (Cisco closed up 52 cents to $14.18; Lucent was up 5 cents at $1.69; Nortel was up 9 cents to $2.28.)
Who would have ever thought, however, that Lucent would ever be reselling Cisco gear?
Lucent’s new strategy
Cisco, Lucent, Nortel and other companies have shed plenty of blood and billions of bucks in battling for network and Internet hardware market shares. To see them working together almost seems sacrilegious.
Mary Ward, a spokesperson for Lucent, said the decision showed that Lucent is not focused on “past rivalries” but rather on better servicing the needs of customers.
“It is a shift,” she said, “but it is part of our announced strategy of focusing on our strong core competencies and partnering with industry leaders.
“This is a good example of what we have said — that we would focus on market opportunities that are the nearest and clearest.”
Not everyone should have been surprised that Cisco would agree to work with a rival. Ben Klayman of Reuters tracked down hints offered by Cisco Chairman John Chambers on Jan. 7 at a Morgan Stanley conference. “I’m open to working with them,” Chambers replied when asked whether Cisco would work with Nortel or Lucent. “We’d like to do that with a major player.”
The deal is limited in scope, so it’s not as if Lucent and Cisco are merging. And even though the telecommunications meltdown has been much harder on Lucent than Cisco, don’t expect Lucent-owned Bell Labs to shutdown.
Ward pointed out that this contract would help Lucent “fill some gaps” in its portfolio of services. Customers were asking for high-speed wireless data solutions based on IP and Cisco, which is heavily focused on Internet protocol networking technology for data and voice, had hardware, software and service support available to help Lucent meet demand, she added.
“Cisco will help us to bridge wireless and packet data networks,” she explained, noting that Lucent’s core competencies rest in wireline and optical networks. Lucent also is at the forefront of building 3G wireless networks around the world. “We have to concentrate on what we do best, find what others do best and help get to the market the solutions customers are looking for.”
More than cell phone data
This deal at first glance appears to focus on 2.5G and 3G wireless technology as touted for the latest multi-media cell phones and hand-held PCs. In fact, Lucent just announced a deal with Orange UK for high-speed wireless services in Europe and is working with T-Mobile on a pilot program in Germany. But Ward stressed that Lucent is targeting what the company sees is a big growth opportunity — high-speed enterprise wireless data.
“One analyst firm, IDC, sees the market as growing 100 percent a year and reaching $16 billion by 2006,” Ward said.
Ward also said Lucent was seeking to offer services that its customers, such as telecoms, could in turn resell as profit centers. Dan Scheinman, a senior vice president for Cisco, concurred. “The combination of these Cisco packet and media gateway products with Lucent’s mobile wireless infrastructure solutions will help mobile operators deliver profitable, new mobile services and reduce operating expenses as they introduce IP into their mobile networks,” he said in a statement.
These days, growth opportunities and increased information technology spending, especially in telecom, are as rare as kind words between George W. Bush and Tom Daschle.
Under the Lucent-Cisco deal, Lucent will integrate and resell a Cisco packet data product that links mobile data users to the Internet as well as intranets and extranets; a Cisco Gateway for low-speed (GSM) and high-speed (UMTS) data services; and a Cisco Media Gateway for voice-over-Internet and voice-over-ATM solutions for 2G, 2.5G and 3G networks.
Lucent will provide services, including deployment, installation, engineering, support and maintenance for these products. Lucent also will provide consulting and network design services and will act as a qualified “Cisco global systems integrator.”
Cisco will contribute service from its “Customer Advocacy” group to Lucent.
(The announcement is certainly good news for RTP’s Cisco campus. The mobile wireless group, led by Ed Paradise, is based in RTP. Some 120 developers and marketing employees involved in wireless sectors that are part of this deal work locally. Cisco’s teams focused on the Packet Data Service Node and Gateway GPRS Support Node and the media gateway also are based in RTP.)
Analyst Steve Kamman of CIBC World Markets told Reuters the contract demonstrated Lucent’s seriousness about offering more services.
And what does the deal mean for Nortel? Are the two ganging up on the one? Not necessarily. As Chambers said, maybe Cisco will do a deal with Nortel someday.
Will Lucent announce a deal with Nortel?
“All I know is what we are announcing today,” Lucent’s Ward said with a chuckle.
Rick Smith is managing editor of Local Tech Wire.