A network mosaic, Cisco, Alcatel strike deal to integrate products

The prevailing buzzword in public networking is "integration." Forget separate networks for different kinds of data, another network for voice, and perhaps another for broadband video or wireless operations - carriers and customers are looking to consolidate.

The pursuit of that integration brings the birth of new equipment, acquisitions and alliances every week. In the latest partnership, Cisco Systems and Alcatel Telecom last week announced a strategic deal. The two plan to combine Cisco's Internet and datacom expertise with Alcatel's telecom and voice experience to initially focus on 10 to 12 integrated products, said John Chambers, Cisco's president and chief executive officer.

"In the Internet and telecom, one year is like seven years in this deregulated market," Chambers said. "There is a rapid convergence that will end up with just a few vendors leading the industry.

Cisco is most interested in Alcatel's voice and wireless capabilities and experience, as well as its asymmetrical digital subscriber line technology, he said.

Alcatel initially will put Cisco's IOS software - including Cisco's proprietary tag switching for Internet protocol - on its asynchronous transfer mode and ISDN carrier switches. It may do the same for its Sonet and GSM mobile equipment, said Jozef Cornu, Alcatel's president and chief operating officer.

"Alcatel is currently looking to expand its presence in the U.S. market and is looking for datacom opportunities," said Michael French, vice president at Insight Research, Livingston, N.J. "The agreement with Cisco is one these forays." Another would be the alliance that Alcatel struck with Loral several weeks ago for datacom over satellite, he said.

Speculation before the deal closed was that Cisco had paired with Lucent Technologies. But French believes that too many competing products and plans exist between Cisco and Lucent.

In a second integration move last week, Cisco bought Ardent Communications Corp. for $156 million in stock. Cisco and Sequoia Capital already held minority equity stakes in the network developer.

"Traditional enterprise networking companies are all making a very aggressive push at the telcos," said Mike Smith, an analyst with Probe Research. "One of the reasons is that if you can build a solid relationship and succeed in that, you tend to get a long-term relationship."