Alcatel-Lucent CEO Ben Verwaayen has a number of reasons to be cheerful these days: His soccer team of choice has just beaten the best in the world; his company is showing growth momentum; he arguably had the most talked-about radio access network (RAN) development at MWC, the lightRadio (that 'light' nomenclature is catchy, no?); and, at last, AlcaLu's share price is heading north, as it has gained more than 57 percent since Jan. 1 and currently stands at €3.54 on the Paris exchange.
And now, more good news for the energetic CEO: His IP division has just established itself as the clear number-two player in the important IP routing sector.
Clarification of AlcaLu's IP sector bragging rights came early Tuesday when Infonetics Research Inc. announced its Service Provider Routers and Switches vendor market-share report for the fourth quarter and full year 2010. According to the firm, the global market for IP routers and Carrier Ethernet switches in 2010 grew by 20.5 percent to US$12.8 billion.
Infonetics reported that, even though AlcaLu only has products in the edge router market (while its main rivals have core IP platforms too), it has been growing its market share for the past three years and was the number-two vendor in the overall IP edge and core router sector in the fourth quarter of 2010 with a market share of 20.5 percent. Infonetics principal analyst Michael Howard also notes that AlcaLu was the number two player for the whole of 2010 in the EMEA region.
The research firm noted that AlcaLu's stellar fourth-quarter IP product revenues, its best ever, pushed it ahead of Juniper Networks Inc. , which also recorded "solid growth." Cisco Systems Inc. is still the market leader, of course: It grew its router and switch sales by 21.6 percent last year for a market share of 42.5 percent, according to Infonetics.
AlcaLu has been challenging Juniper for second place for a while now, but seems to have upped its game in 2010, driven by sales related to ongoing IP transformation projects, the migration to packet backhaul, and its first sales of 100Gbit/s Ethernet cards (deployed by eight operators).
In fact, AlcaLu's IP division increased its annual revenues by more than 24 percent to €1.46 billion ($2 billion) in 2010, making it the best performer (in terms of annual growth) in the vendor giant's Networks operating segment. As the table below shows, the IP team's sales grew steadily through the year, reaching €508 million ($695 million) in the fourth quarter alone.
Table 1: Alcatel-Lucent Networks Operating Segment Revenues in 2010
| In millions of euros | Q1 2010 | Q2 2010 | Q3 2010 | Q4 2010 | Full year 2010 | Full year 2009 | YoY growth |
| Networks | 1,928 | 2,304 | 2,459 | 2,952 | 9,643 | 9,076 | 6.25% |
| -- of which IP | 272 | 318 | 366 | 508 | 1,464 | 1,177 | 24.38% |
| -- of which optics | 567 | 622 | 651 | 815 | 2,655 | 2,854 | -6.97% |
| -- of which wireless | 819 | 1,021 | 1,068 | 1,156 | 4,064 | 3,547 | 14.58% |
| -- of which wireline | 298 | 366 | 396 | 488 | 1,548 | 1,619 | -4.39% |
| -- of which others and eliminations | -28 | -23 | -22 | -15 | -88 | -121 | 27.27% |
| Source: Alcatel-Lucent | |||||||
The wireless division also managed annual growth, but as the numbers show, the optical and wireline (broadband access) lines of business saw their annual revenues decline year-on-year in 2010. As a result, the IP division generated a greater share of AlcaLu's overall Networks sales -- 15.2 percent in 2010, compared with 13 percent in 2009.
If those trends continue, Verwaayen and others in the senior AlcaLu team will no doubt be looking for even greater things from Basil Alwan and his IP team this year, in terms of overall sales and revenue contribution to the Networks line of business.
What AlcaLu's full-year numbers don't reveal is how the IP division fared in terms of operating margins. Overall, though, Networks fared much better in 2010, with an adjusted operating income (after one-time items) of €187 million ($256 million) compared with an adjusted operating loss of €297 million ($406 million) in 2009.