Alcatel-Lucent Challenges Cisco With Router for Network Cores

Alcatel-Lucent, the Paris-based maker of telecommunications gear, has designed a router to be used at the center of Internet providers’ networks, a market dominated by Cisco Systems Inc. (CSCO) and Juniper Networks Inc. (JNPR)

Alcatel-Lucent is scheduled to introduce today its 7950 XRS router, a device to speed packets of data along networks. The so-called core router, which operates at large-network junction points, took three years to develop and is designed to support as much as 6.4 terabits -- or 6.4 trillion bits -- per second of data traffic, making it suitable for the largest potential customers such as AT&T Inc. (T) and BT Group Plc. (BT/A)

Phone companies have slowed spending, pressuring network- equipment makers to take moves to rejuvenate revenue. Cisco and Juniper control about 90 percent of core-router sales, said Shin Umeda, vice president in charge of router-market research for Redwood City, California-based Dell’Oro Group. Alcatel-Lucent’s core routers face “a long process” of gaining a foothold in the market, he said.

“I would be surprised if they displaced one of the incumbents at a big carrier,” Umeda said in a telephone interview.

Alcatel-Lucent has been selling smaller-scale routers designed for the perimeter of the Internet, as distinct from the core. The company is entering the core market with the help of a processor that keeps power consumption down while handling more data traffic, said Basil Alwan, president of Alcatel-Lucent’s Internet protocol division. An announcement of the routers was scheduled to be made today in Santa Clara, California.

‘Significant Difference’

“We are revolutionizing the network core, just as we did over the past 10 years at the network edge with service routing,” Alwan said in a statement prepared for the announcement. In an interview, he declined to disclose the price of the new product.

Alcatel-Lucent’s new routers are designed to cut the amount of hardware that a telecommunications-service provider needs, Umeda said.

“If it pans out to what they are claiming, it will be a significant difference to what the competitors have,” he said.

Alcatel-Lucent Chief Executive Officer Ben Verwaayen is struggling to keep the company profitable amid market-share challenges and tightness in customer spending. Philippe Saint- Aubin, a representative of the European workers’ council for the company, said in February that Alcatel-Lucent intended to eliminate as many as 1,800 additional jobs in Europe through firings and relocation. At the time, an Alcatel-Lucent spokesman, Simon Poulter, said costs were being cut, and declined to comment on the number of positions affected.

Cisco Squeeze

Cisco, the world’s largest maker of computer-networking equipment, has been squeezed. The company, based in San Jose, California, offered a fiscal fourth-quarter forecast on May 9 that fell short of analysts’ estimates for sales and profit. Chief Executive Officer John Chambers said demand had weakened in Europe, India and among large companies in general.

One potential bright spot in the spending picture is an industry upgrade to 100-gigabit network technology. With data traffic growing 30 percent to 40 percent a year for the next five years, carriers are moving to 100-gigabit to accommodate higher volume, Umeda said. One gigabit means 1 billion bits.

“There’s an ebb and flow in the core-router spending cycle, and this 100-gigabit technology might help it pick up,” the researcher said.

To contact the reporters on this story: Jordan Robertson in San Francisco at jrobertson40@bloomberg.net; Scott Moritz in New York at smoritz6@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.