Going native

How strongly does Siemens' new Unisphere Solutions venture position the telecom equipment giant for an impending data-centric world?

The U.S-based venture, which its new CEO Martin Clague describes as "not a start-up but a jump-up," will incorporate two companies that Siemens plans to acquire-Castle Networks and Argon Networks-along with parts of Siemens.

Siemens' commitment to invest between $1 billion and $1.2 billion in data networking pales in comparison with the investment its North American competitors have made, said Art Schoeller, research director for The Gartner Group. Nortel Networks paid between $7 billion and $8 billion to acquire Bay Networks, and Lucent Technologies paid $20 billion for Ascend Communications.

But Siemens has significant data networking expertise leveraged primarily outside the U.S., said Frank Dzubeck, president of Communications Network Architects: "They have voice over [asynchronous transfer mode], they have ATM switches, they've got digital subscriber line; you just haven't seen it."

Siemens' strategy is smarter than that of European competitors-including Ericsson, Alcatel and Nokia-that have treated U.S. operations as a sales office, said Cimi Corp. President Tom Nolle. Siemens "is not here to get a market, but to get the technology that'll win in the market," he said.

Nolle described North America as a "petri dish" for the direction in which communications networks will evolve. "If the European players don't come to the U.S. and play in this new market during the five years this market will only exist in the U.S., Lucent and Nortel will emerge as [the winners]," he said.

A key opportunity is what Nolle describes as facilities virtual private networks (VPNs)-Internet protocol-based networks other than the Internet, such as Lucent's IP-enabled frame relay offering. Cimi Corp. estimates the facilities VPN market at $380 billion worldwide over the next 10 years.

Argon is a particularly valuable asset because it is strong in multiprotocol layer switching, which will be crucial to facilities VPNs, said Nolle.

Castle Networks' mediation platform also could be important as voice traffic moves onto data networks. That platform enables carriers to offer enhanced voice services, such as specialized 800-number services, using H.323 or other IP voice protocols.

"The customer signals them and they signal the network," said Nolle.

Siemens also bought a 20% share of Accelerated Networks, which offers access equipment that targets competitive local exchange carriers wanting to offer voice and data over DSL or T-1 lines.

"This wasn't just a buying binge," said Nolle.

Pointing to Siemens small market share in the U.S. service provider market, Nolle added, "What Siemens has that Lucent and Nortel don't is a clean slate."