Read the tech-financials these days and you see two maybe-recovery stories. Nokia has been a company in decline for several years, but perhaps no longer. With sales of Lumia handsets much stronger than expected and NSN turning in a profit, Nokia may have the bad times behind them…perhaps. Alcatel-Lucent has seen some bad times too, and recently it’s raising some more working capital has given its stock a boost. Now it’s bought a small optical player at a time when the industry seems to be running away from optics. Maybe it knows something…or not.
I think Nokia’s Lumia success is still more to be proved than to be banked. The operators would like to see handset options beyond Android and iOS, and in particular they’d like to see some low-end devices. Any time a new gadget comes out there’s a period of infatuation, and Lumia and Windows Phone are in that period. Can they get out of the transition/fad phase and into a real market?
The biggest risk may have nothing to do with phones. Windows 8 is an attempt by Microsoft to create a tablet-laptop-phone ecosystem that’s built primarily around a “tiles” interface. The problem it has is that the laptop side of the picture is artificial; Windows 8 looks like Windows 7 with a new boot-up GUI that nobody likes. You could make it workable with a touchscreen laptop, but that would raise the price and validate the tablet model. And a laptop with a touchscreen also eats into the Windows tablet differentiation of a neat keyboard. So the ecosystem Microsoft wants may be tough to promote, and if it fails it might well drag Phone along with it, and Lumia along with Phone.
On the NSN front we have a similar tension between near- and long-term. NSN has cut costs and dropped out of a number of marginal markets. But you can’t build a company by cutting costs; it vanishes to a point along with your business if you try to keep it up. NSN is focusing on mobile but mobile is RAN plus IMS and IMS is going to the cloud (via NFV and other forces). Will all mobile software follow, and become a simple cloud app? If so, how does NSN differentiate itself. RAN alone doesn’t make you a network vendor it makes you a radio vendor.
With Alcatel-Lucent, the devil here is going to be in the details. Their Capella deal could signal they’re interested in metro optics on a large scale (very smart), or agile core optics (semi-smart in the near term and deadly in the long term). Metro optics, I think, is the Golden Ring of the optical space, the area where there’s significant deployment likely and significant new architectural needs to help differentiation. In theory, Alcatel-Lucent might have some pretty hot ideas in the space. For example, could agile metro optics help walled-garden IPTV? Could it be a differentiator in mobile backhaul? Yes and Yes! In the core, though, optics are buried in an IP envelope that consigns the core optical space to being the cheapest possible core connect technology. That’s not a business I’d buy into, even on the cheap. So where is Alcatel-Lucent going?
They COULD be thinking of a new metro. They are surely thinking of cloud-hosting service logic; they are the only vendor with name recognition in NFV and they’re also a long-standing player in leveraging infrastructure with services. Yes, their articulation is bad in that area, but they have assets. The challenge is to utilize them now, when they’ve been fallow for years. To do that they have to reinvent themselves, and they actually have a play to do that.
So we have two recovery stories that are still more stories than recovery. I think both Nokia and Alcatel-Lucent could do a major come-back, continuing their recent momentum, but they’ll need more than transient phone success or a small-play optical buy to do that. Most of all they may need time, a commodity neither has an unlimited quantity of.
