Now that Alcatel-Lucent is to become part of Nokia, it’s a good time to look back and see what has happened over the last decade or so in the global telecoms equipment market. The picture that emerges is one of consolidation and divestment. Consolidation into four major players: Huawei, Cisco, Nokia and Ericsson. Divestment of consumer, handset and enterprise units into a number of “new” players: Belkin, Avaya, Alcatel Lucent Enterprise, BenQ, Gigaset, Unify, Microsoft, Lenovo, Motorola Solutions, Sony and Mitel.
In hindsight we can conclude that the emergence of Apple’s iPhone, Cisco’s continued enterprise market dominance, and the emergence of Huawei as a global low-cost all singing and dancing telecom equipment player are the primary reasons for this disruption. Consolidation has been primarily driven in response to Huawei. Significant divestments and spin-offs of consumer and handset units have occurred because of Apple iPhone. The sale of Nokia’s smart- and feature phone division to Microsoft is the perfect example of this. Divestments and spin-offs of enterprise units have been a response to Cisco’s enterprise dominance. The graph below depicts what’s happened (click to enlarge):
In a nutshell:
- Huawei is the only telecoms equipment vendor that still spans consumer, enterprise and service provider markets.
- Cisco sold off Linksys to Belkin and killed the Flip mini camcorder and concentrates on enterprise and service provider markets.
- Alcatel merged with Lucent. Alcatel Lucent sold off its enterprise division to China Huaxin.
- Lucent spun off its enterprise division and created Avaya.
- Siemens sold its mobile handset business to BenQ, spun off its fixed handset business and created Gigaset and divested the enterprise business that is now called Unify. Siemens networks was eventually sold to Nokia.
- Nokia sold its handset business to Microsoft. Nokia Siemens Networks acquired the Motorola wireless networks business and became Nokia again.
- Motorola sold off its wireless networks unit to Nokia, its handset business to Google, and the enterprise business is now named Motorola Solutions. Google sold Motorola to Lenovo.
- Ericsson bought Marconi and sold off its stake in Sony Ericsson handsets to Sony and its enterprise business unit to Aastra. Aastra has now been acquired by Mitel. Ericsson als acquired Nortel’s CDMA and LTE assets.
- After Nortel filed for protection from creditors in 2009, Ericsson won an auction to purchase Nortel’s CDMA and LTE assets and Avaya won an auction for Nortel’s Enterprise Solutions business.
- Nokia has now stated its intent to buy Alcatel-Lucent for US $16.6 billion
As a result:
- Huawei, Cisco, Nokia and Ericsson remain as large global telecom equipment vendors.
- Marconi, Alcatel, Lucent, Siemens Communications, Nortel and Motorola no longer exist
- Belkin, Avaya, Alcatel Lucent Enterprise (Huaxin), BenQ, Gigaset, Unify, Microsoft, Lenovo, Motorola Solutions, Sony and Mitel now compete in consumer and enterprise telecoms markets.
We expect that mergers and acquisitions between telecom service providers will continue. This will create larger buyers that will put downward pressure on equipment prices. As a result there will be continued consolidation in the service provider telecoms equipment market. We believe Cisco will continue to dominate enterprise networking for the foreseeable future, creating a need for further consolidation of enterprise equipment players.