Alcatel lands Xylan

Network managers looking for a full-service equipment provider to satisfy all their voice and data networking needs have another one to choose from with the announcement that Paris-based Alcatel SA is acquiring Xylan Corp. of Calabasas, Calif., in a US$2 billion deal.

However, analysts said that although the Alcatel/Xylan pairing will create an impressive product portfolio for the carrier market, the two companies’ current lack of mindshare among enterprise customers will prevent them from going head to head against the leading voice/data contenders just yet.

Bob Hafner, vice-president and research director at Mississauga, Ont.-based Gartner Group Canada, said he considers Cisco, Nortel, Lucent and the combination of Siemens, 3Com and Newbridge to be the four top vendor camps in the end-to-end networking market.

“There is a bunch of sleeping giants, and these are very large companies that can be successful at becoming the fifth player,” Hafner said, noting that he considers Alcatel, Motorola, Fujitsu, NEC, Hitachi, Intel, Ericsson, IBM and Compaq to be in this “sleeping giant” group.

“Alcatel is starting to wake up. It’s a matter of do they get out of bed,” Hafner said. “Alcatel is clearly making noise that they want to be one of these (top end-to-end) players. Their success will be dependent on how much mindshare they can get from the market.”

Currently, Alcatel is not recognized as an enterprise player in Canada, Hafner said.

“People in Canada often think of Alcatel as a cable provider, and they’ve done a great job in Canada doing that. They have some transport equipment, like SONET-based equipment, that they’ve sold in Canada, but that’s purely in the service provider space. In the enterprise, very few customers think of Alcatel when they think of enterprise networking. That’s going to be a big challenge for them, getting that mindshare.”

One of the main thrusts behind acquiring Xylan is to help Alcatel establish itself as a viable data networking player in the North American market, according to company officials.

“We are very strong in the carrier business in North America,” said Olivier Houssin, executive vice-president of Alcatel Telecom, during a teleconference to announce the deal, “but we have not previously targeted the enterprise market.

“Xylan has very strong engineering, sales and support teams in the U.S.,” Houssin added. “We’re bringing together Alcatel’s leading enterprise integration position in Europe with Xylan’s strong presence in the U.S. and elsewhere.”

Jim Grimes, Canadian country manager for Xylan in Markham, Ont., said during an interview that Xylan has had a fair bit of success within the Canadian service provider market, but his company’s relatively small size, compared to Nortel or Lucent, has kept it from winning large enterprise customer accounts and therefore forced it to remain a niche player.

“In terms of the [contracts] we don’t win, nine times out of 10 our downfall has been the uncertainty of Xylan — who are we, how big are we, are we going to be around, do we have the strength of organization to really back the mission-critical applications that these companies are running on a large scale?” Grimes said.

“When I can go to the table today and say I’m not a $365 million company, I’m actually part of a $42 billion organization now with over 100,000 employees worldwide, with an infrastructure of support and services across Canada that touches every city, I think any doubts around our viability instantly can go away,” Grimes said.

In terms of the North America data networking market, Alcatel/Xylan may actually have an easier time marketing itself as a viable enterprise provider in Canada than the United States, according to Tom Nolle, president of Voorhees, N.J.-based consultancy CIMI Corp. By way of a disclaimer, Nolle said Xylan is a small-scale client of CIMI.

“The chances of a multinational like Alcatel entering the U.S. LAN market successfully is zero,” Nolle said. “I think their odds are better in Canada because you guys buy smarter than we do (in the United States). You have a more European buying model, you actually look at features and spec sheets and stuff like that, instead of just looking at ads.”

However, Nolle suggested Alcatel could leverage Xylan’s success in the Canadian service provider market in order to reach U.S. enterprise customers. He explained Xylan has almost 60-per-cent market share in the Canadian competitive local exchange carrier (CLEC) market, with MetroNet Communications Corp. being one of its largest customers. According to Nolle, MetroNet’s recent acquisition by AT&T Canada may open the door for Xylan to make headway into the U.S. CLEC market later this year when long-distance providers such as AT&T Corp. start to enter the local exchange arena south of the border.

A strong position in the carrier market could then help Alcatel/Xylan to promote elements of its product portfolio as suitable for customer premises equipment (CPE) environments, Nolle said.

He added that Xylan has one of the most versatile LAN switching product suites available, which is evident by the success it has had in the carrier market.

“But the company has never been strong in the marketing space, and so their stock performance and their sales in the U.S. have never really reflected their technical potential,” Nolle said.

Gartner Group’s Hafner agreed Xylan has a good data networking product set. However, he said one of Alcatel’s biggest challenges in the short term will be to integrate Xylan’s products with its own, plus others it has acquired recently from other companies. Shortly after the Xylan acquisition, Alcatel announced it was buying Assured Access Technology Inc., a small Milpitas, Calif.-based manufacturer of remote access products for the IP carrier market. In October 1998, Alcatel acquired Spokane, Wash.-based routing switch maker Packet Engines Inc. and its gigabit Ethernet technology. Alcatel’s own products include PBXs and ATM, frame relay and DSL equipment.

“I think it will take at least six months to a year to get these products all brought in together and integrated, and put a consistent single network management platform across all these products. Then we can start to look at them as a strong player in the end-to-end solution provider space,” Hafner said.

Would you recommend this article?


Thanks for taking the time to let us know what you think of this article!
We'd love to hear your opinion about this or any other story you read in our publication.

Jim Love, Chief Content Officer, IT World Canada

Featured Download

Previous article
Next article

Featured Article

ADaPT connects employers with highly skilled young workers

Help wanted. That’s what many tech companies across Canada are saying, and research shows that as the demand for skilled workers...

Related Tech News

Tech Jobs

Our experienced team of journalists and bloggers bring you engaging in-depth interviews, videos and content targeted to IT professionals and line-of-business executives.

Tech Companies Hiring Right Now