Vendors: Next year, do less

Alcatel-Lucent is set to unveil a new strategy at the end of next week. And some analysts are already saying the company should try to narrow its focus — to do less in 2009. For example, some are saying that the megavendor might consider getting out of the wireless business, citing weak sales of CDMA gear in North America in particular (though just today, Alcatel-Lucent hailed a $230-million CDMA upgrade job in China). As that North American market was a large part of what Lucent Technologies brought to the combined company, and as the combination of Alcatel and Lucent has been viewed about as favorably as a hypothetical merger between Evian and Exxon, it’s hard to avoid thinking that what Alcatel-Lucent should really do to set itself on the right course once and for all is to un-do the big merger that created the Hyphenated One in the first place. After all, wouldn’t that be the logical next step, following the recent departures of top Lucent execs Pat Russo and Cindy Christy?

At the same time, while I know it’s easy to point to the Alcatel-Lucent merger as some kind of single, self-dooming Icarus moment, recall that two years ago, analysts warned that Nortel Networks, mired in accounting problems, would come too late to the M&A party and miss out on the table stakes needed to compete in the age of megavendors. Nortel never buried itself in the Byzantine integration woes of a giant merger, but it is today facing a more dire down-sizing dilemma than even Alcatel-Lucent.

And look at Tellabs. It’s no over-stuffed unwieldy Queen Mary, but even it has been forced into some serious soul-searching of late to determine, essentially, how the company can do less going forward.

Still, whatever strategic changes Alcatel-Lucent announces next week, they may be every bit as painful as those already announced by Nortel and Tellabs, because much of the logic justifying Alcatel-Lucent’s girth still holds. Yes, perhaps they banked too much on IMS as a unifying force in their product strategy. But as Glen Hunt, principal analyst at Current Analysis, told me in a recent podcast, Alcatel-Lucent has done a great job spreading its IP expertise across its broad-based product portfolio, from wireline access to edge networking to mobile backhaul. The broader the portfolio feeding off of that centralized know-how, the more bang for the buck.

Despite that logic, though, the current market appears to be forcing vendors to compartmentalize more into niches in an odd juxtaposition of the typical pressure toward consolidation that tight markets often produce. Where is this all headed? You tell me, in the comments section below this post.

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