Alcatel finalizes sale of enterprise unit to China Huaxin

Alcatel-Lucent’s Enterprise division has always stood in the shadow of its bigger telecom equipment maker brother.

Now control has been passed to China Huaxin, which will have to decide how much it will invest in new product and technologies to keep up with the fast changing corporate world of cloud computing and software defined networking.

The two manufacturers said Wednesday that the deal, announced in February that gives China Huaxin 85 per cent of ALE, has now closed. The parent gets the equivalent of $284 million.

Alcatel-Lucent, which has a significant telecom equipment research lab in Ottawa, can now focus on sales to telecommunications companies where it has  a large presence. The new majority owner of ALE, now a standalone company which sells direct and through a channel of 2,500 partners around the world, however, has to face unified communications competitors like Cisco Systems Inc. and Microsoft Corp.

“This is a new beginning for us,” Gus Vasilakis, who now heads ALE’s North American operations, said in an interview. “We’re becoming a more visible player.”  ALE starts with some 20 sales and service staff in Canada.

ALE’s products range from desk phones to the Business integrated Communication Solution (BiCS) server for SMBs, to the OmniPCX Enterprise.

China Huaxin is a long-time Alcatel-Lucent partner, working with it on sales to telecom carriers in China through Alcatel-Lucent Shanghai Bell. Originally created in 1993 by the Chinese government as a vehicle for investment in the ICT sector, it continues to be completely owned by the state. Other holdings include several information technologies companies, a venture capital company, a precision manufacturing firm and an optical fibre and cable division.

Two industry analysts agree that the sale could benefit ALE because the parent company didn’t pay enough attention to it. “Historically it’s always been the ugly stepchild of the larger A-L that was really focused on telecom sales,” said Zeus Kerravala of ZK Research. “It has some very good products. It was the first network vendor that had a (network) fabric, follows industry standards has a good UC platform.”

“The hope would be to take some of the benefits from the Chinese company, maybe leverage some lower-cost engineers, some more talent, but ultimately leave the product alone and just act more as an investor.” However, he acknowledged that it will be “an uphill challenge.”

Andre Kindness, an enterprise network analyst with Forrester Research, noted that in talks he has with business customers Alcatel’s name rarely comes up. Telecom equipment makers that haven’t focused on the enterprise – like Avaya, Juniper Networks and Alcatel-Lucent – have found it hard to make sales to businesses, he pointed out.

One problem is Cisco and VMware “have everybody’s ear’” when it comes to enterprise networking, he said. In addition, there’s uncertainty as vendors sort out their software-defined networking strategies.

Vasilakis agreed that the enterprise division’s triumphs got buried by news of the telecom division’s “billion-dollar initiatives.” But, he added, “the market is ready to expand.”

ALE’s distributor agreements at the moment are the same as before, but Vasilakis said he’s started to revamp them to help get products more widely available.

ALE’s new CEO, Michel Emelianoff (he had been president of the division within the former parent company) told reporters Wednesday that ALE’s goal “is to become the leader in IP communications for enterprises,” doubling sales over the next five years. That will in part be done by moving from being product-oriented to delivering business solutions, he said.

ALE is expected to have a new name by next spring.

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Howard Solomon
Howard Solomon
Currently a freelance writer, I'm the former editor of and Computing Canada. An IT journalist since 1997, I've written for several of ITWC's sister publications including and Computer Dealer News. Before that I was a staff reporter at the Calgary Herald and the Brampton (Ont.) Daily Times. I can be reached at hsolomon [@]

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