2Wire finds some big friends, cash

2Wire said today that Alcatel, AT&T and Telmex have acquired a combined 51% stake in the San Jose-based residential gateway and set-top vendor.

Under terms of the deal, Alcatel will pay about $120 million for a 25% stake in the vendor while Telmex and AT&T combined will have a combined 26%. Also, Alcatel will have two seats on the new nine-person board of directors; Telmex and AT&T will have three seats between them. Exact financial details were not released because 2Wire will remain privately held. However, the company said its 2004 revenue was $176 million.

As part of the agreement, Alcatel plans to integrate 2Wire’s HomePortal gateway, OfficePortal router and MediaPortal set-top box as part of its triple-play ecosystem. “

“We’re going to be working to make sure we’ve got interoperability of the products between the two companies,” a 2Wire spokesman said.

However, the deal is not exclusive and won’t prevent Alcatel from using other vendors’ customer premises equipment.

“There’s no question that we’ll go to a customer and say that if you’re going do a home networking service, we’d prefer you use 2Wire,” said Tim Krause, chief marketing officer-North America for Alcatel. “That’s not to say that we can’t work with a number of companies. Often a service provider will want to work with multiple set-top box vendors or gateways.”

Key to the deal, Krause added, was 2Wire’s management system, which will allow carriers to offer managed services much further into the home than that traditional demarcation point. Additionally, the 2Wire software will allow operators to manage interoperability between a variety of devices such as personal video recorders and set-tops.

The deal also brings together two early vendors in AT&T’s (nee SBC’s) video plans, albeit from two different perspectives. 2Wire is providing its MediaPortal as part of a bundled home entertainment offering from AT&T to blend DSL with satellite video service, while Alcatel is serving as the system integrator for SBC’s Project Lightspeed, which will roll out an IPTV offering later this month or early in January.