ATM | Ian Andrew Bell

Alcatel Buys Newbridge

Ian — Thu, 24 Feb 2000 06:59:30 +0000

Wednesday February 23 6:03 PM ET Alcatel Buys Newbridge to Boost Position By Susan Taylor OTTAWA (Reuters) – It was a long dance, but Alcatel (CGEP.PA) on Wednesday finally won Newbridge Networks Corp.(Toronto:NNC.TO – news) in a $7.1 billion deal that will give the French telecoms equipment maker a more solid footing in the United States. Alcatel, which launched takeover negotiations four months ago with Canada’s Newbridge, said on Wednesday it had struck an all-stock deal to exchange 0.81 of an Alcatel American Depositary Share for each Newbridge common share. Alcatel will issue about 35 million shares, equivalent to 17.6 percent of its current capital, to finance the acquisition. Shareholder approval is still pending for the merger, which is expected to close in late May or early June. The much anticipated takeover comes after Newbridge said in November it was open to offers following its sixth earnings warning in 10 quarters. At one time, Newbridge was speaking to five companies, President and COO Pearse Flynn told Reuters. Newbridge hit the selling block as acquisition-hungry Alcatel was looking to expand its product line and gain a better foothold in the rich U.S. market. Last September, Alcatel struck its fifth U.S. purchase in 12 months. “The clear objective is to position Alcatel among the top three players worldwide,” said Alcatel Chief Executive Serge Tchuruk in a conference call on Wednesday. “We believe that this is the right time to do this deal.” Alcatel, which has more than half the global market for asymmetric digital subscriber line (ADSL) technology for high-speed Internet access, said its combination with Newbridge allows it to take on network giants Lucent Technologies Inc. (NYSE:LU – news), Nortel Networks Corp. (Toronto:NT.TO – news)(NYSE:NT – news), and Cisco Systems Inc. (NasdaqNM:CSCO – news) An explosion of network traffic, fueled largely by burgeoning use of the Internet, is increasing demand for network equipment. In turn, that is triggering increased spending by Alcatel customers on asynchronous transfer mode technology — Newbridge’s flagship equipment, Tchuruk said. “We want to make sure that we’re there with not just our access equipment — but also the switching and the core equipment that goes behind it,” said Alcatel Chief Operating Officer Krish Prabhu in an interview with Reuters. Newbridge has a 23-percent share of the world market for ATM equipment, which transmits multimedia data at high speeds across large networks. It bolstered that position with its December release of the world’s highest-capacity ATM switch. Newbridge, which released record third-quarter revenues of C$521 million on Wednesday morning, said it is now seeing the benefits of new product releases from recent acquisitions and internal development efforts. In 2000, Alcatel said Newbridge will contribute operating income of $160 million, which includes $50 million in savings. In 2001, Newbridge contributes operating income of $430 million, including $150 million in savings. The two firms now face the task of merging operations. A new division, which will be based in Newbridge’s Ottawa-area headquarters and led by Flynn, is expected to have proforma annual sales of more than $2.5 billion. The combination brings to Alcatel such benefits as greater credibility and larger market presence, said Paul Sagawa, analyst at Sanford Bernstein & Co. in New York. “However, there are always going to be integration issues — particularly with a company with a culture as strong as Newbridge.” Newbridge founder and CEO Terry Matthews — who owns 22 percent of the company — will not remain an employee with Alcatel beyond the transition, though there has been no decision if he will hold any other titles, such as director. “I will enjoy very much…growing complementary technology companies on the one hand, and the other hand in working particularly with Krish and Pearse in raising the company’s profile in North America,” said Matthews during the conference call. The purchase also includes Newbridge’s stake in a string of affiliate companies including CrossKeys Systems Corp. (Toronto:CKY.TO – news), which makes network management software, and Tundra Semiconductor Corp. (Toronto:TUN.TO – news) Alcatel said it expects annual cost savings of $220 million by 2003 from overlap cuts, economies-of-scale and margin improvements from the elimination of some channel partners. Few job cuts are expected, Flynn said. Newbridge shares fell C$2.60 on the Toronto Stock Exchange to end at C$48.00 in heavy trade of nearly 15 million shares on Wednesday, while on New York the issue dipped 2 3/16 to 32 13/16 on 13.7 million shares. Alcatel stock lost 8.63 on the Paris bourse to end trade at 217 euros. ($1-$1.46 Canadian)

H.323 as Bag of Mostly Water..

Ian — Thu, 26 Aug 1999 23:36:31 +0000

I was piqued by this until I realized it was an advertisement for SIP. SIP has its own set of problems.

-Ian.

http://www.networkcomputing.com/1017/1017colwillis.html

When Good Standards Go Bad

August 23, 1999 By DAVID WILLIS

Sometimes there’s just no turning back: When the raft is in the rapids, the skis are at 45 degrees, or the tattoo gun is halfway through your sweetie’s name, all you can do is plow ahead. That’s where the VoIP (voice over IP) industry is with H.323, but behind the scenes vendors and users are beginning to question the choice.

Everybody loves standards. They promise interoperability, freedom from the tyranny of closed systems, greater choice for the customer and lower cost of ownership. Criticizing standards is like censuring democracy and capitalism. But the wrong standard can stagnate an entire industry.

The first version of H.323 is now more than three years old. Version 2 has been out for 18 months, yet the few products claiming compliance still lack features essential to practical use–namely encryption, advanced call control and network-based call management. Microsoft’s latest Windows NetMeeting 3 still can’t claim more than partial compliance, and it is the industry’s most used PC desktop end point. H.323 stacks are available, but only from a handful of vendors. And don’t look now, but version 3 is just around the corner. The H.323 standards are further ahead of the market than any other technology since ATM, and for the same reason: The market doesn’t understand them.

H.323 makes for good voice calling in the same way that Sumo wrestlers make good jockeys. I’m not claiming that H.323 has any architectural flaws, just that it produces bloated products. I can only comment on what I’ve seen it do to a network, on bugs found in H.323 implementations and on the painfully slow process of getting vendors to fix them. The promise of opening up advanced PBX call-handling features using H.323 simply isn’t being met. IP-based PBX vendors can’t even forward calls between each other’s products, for example.

Without a doubt, vendors are devoting some attention to interoperability, with many very smart people endeavoring to make this stuff work. More than 30 vendors have pledged support for the iNow! Profile (www.imtc.org/act_inow.htm), which plans to bring about Internet telephony interoperability using H.323 version 2. But the profile was published more than four months ago and the implementation dates are still fuzzy. iNow! isn’t that ambitious anyway–it doesn’t address call privacy, gateway-to-gatekeeper interoperability, phone-to-PC/device service, roaming or SS7 integration. Where iNow! will succeed is in gateway-to-gateway and phone-to-phone connections–in other words, in providing transmission services in the middle of the network. It won’t help at the end points, where we’re still waiting for real innovation.

VoIP should run on Internet time, but H.323 is still dialing into Prodigy at 300 baud. Long-distance cost reductions are only a short-term reason to use VoIP, and when that opportunity dries up, H.323 will have no future. Long-term, innovative applications at the end points will drive VoIP. These applications must be easy to create by a wide range of developers, and H.323 won’t deliver. It’s not optimized for real networks, it’s too difficult to develop and it requires too many resources at the client. The specification is further burdened by video and whiteboarding services. H.323 has more oversized baggage than the Augusta airport a week before the Masters.

Do an end run around all the H.323 marketing, and product engineers will tell you that they’re waiting for something better. A number of efforts aim to simplify VoIP development, some with amazing success. Four weeks after the IETF’s SIP RFC (Session Initiation Protocol-RFC 2543) was published, 18 vendors demonstrated some level of interoperability. Columbia University students have even built SIP implementations as homework assignments. It’s exciting stuff, and I’ll be digging into it in more detail in my next column.

Send your comments on this column to David Willis at dwillis [at] nwc [dot] com. —