Is ALU-E For Sale?

by Dave Michels

Reuters reported last week that “Alcatel was considering a sale of the corporate telephony unit – which employs 2,800 people including 1,400 in France – as part of its “Shift” plan, which includes 10,000 job cuts, 1 billion euros cost savings and 1 billion of asset sales.” My response: Who Cares?

The report states “corporate telephony” is for sale, this is a portion of the Alcatel-Lucent Enterprise division, which is a subset of Alcatel-Lucent. The article itself is innuendo – 1 billion euros cost savings? This may or may not be true, but cost savings alone are meaningless without mention of the offsetting revenue. Why would ALU leak such a silly story to Reuters? Ah, they didn’t!

The source is anonymous with only one clue: a representative from ” the CFDT union. ” It is precisely French labor laws that are likely preventing ALU from selling its corporate telecommunications business. Leaking news like this only casts doubt about a vendor’s long term viability, why a union would do this eludes me.

Does ALU want to sell its corporate telephony business? I don’t know, but they would be fools not to consider it. The company has been losing money, and its new CEO is chartered to rectify that. That typically means selling off or shuttering some divisions. I’m sure every division has at least been considered – the most profitable are the most valuable and the ones hemorrhaging cash are easy targets for obvious reasons. The ones in the middle are in the middle. Nothing is safe when the bottom line is in the red.

However, the ALU-E telephony business is actually doing well, particularly in UC. I was recently briefed on the percentages, but for whatever reason that information was under an NDA, so you won’t hear any specifics here. I will say there are no indications that corporate telephony has been put out to pasture – active ongoing investments are continuing with what appears to be a strategy toward the long game.

So is the corporate telephony business for sale? Of course. Why do I know this? Because every vendor in UC is for sale.

In general terms, every UC premises-based vendor is:

  1. In recovery
  2. Implementing big changes (product and go-to-market)
  3. For sale.

As a whole, the industry has not seen a lot of growth. But, that’s not to say it isn’t  a healthy, large, and vibrant industry. The bigger problem is the industry is it is not particularly sexy. It’s complex with long lead times and long ownership cycles. It’s a sucker’s game compared to selling say smartphone apps.

There isn’t a sane vendor out there that wouldn’t give serious consideration to a valid exit or partnership. We will continue to see some interesting mergers and acquisitions in 2014. The only reason we are not seeing a ton of mergers and roll-ups is because there are not that many buyers. There are probably several buyers or alliances that make sense – and I”m sure many of them are being explored – across the industry.

Personally, I think are coming to an end of the traditional market consolidation – the next round of acquisitions are more likely to be from outside the industry (outside buyers don’t represent consolidation). It would not surprise me to see CRM firms begin acquiring UC vendors.  I believe UC will begin to fade as a stand alone industry as more vendors opt to communications enable applications and processes.