N+I: Alcatel to expand into US

NEWS Amid the wreckage in the telecommunications industry, French giant Alcatel maintains that it is a company in the right place at the right time. The appearance of Alcatel chief executive Serge Tchuruk at the NetWorld+Interop conference here suggests that his Paris-based company is serious about its competitive chances and is ready to go head to head with Cisco Systems for corporate and service provider business in the United States. Tchuruk said Alcatel is positioned to compete in the market after investing heavily in its infrastructure and aggressively buying companies to expand its business. Alcatel has said about 25 percent of business now comes from the United States. "It's a market where we have massively invested," Tchuruk said during his keynote address to a small, but packed, conference hall. "Believe me, Alcatel is here to stay, and here to stay in North America." Tchuruk has reason to set Alcatel apart from the bleeding telecommunications pack. Although Alcatel is financially stable, rivals such as Lucent Technologies and Nortel Networks have struggled with huge debt, dwindling business and shrinking stock prices. What's more, Alcatel has invested in corporate-networking technology while Lucent and Nortel have bowed out -- positioning Alcatel as a viable alternative to Cisco in that market. But with network service provider spending expected to drop 20 percent to 30 percent this year, even Cisco has had to reevaluate its networking strategy. Cisco chief executive John Chambers will offer a counterpoint to Alcatel's market view on Wednesday when he delivers a speech here. The telecommunications side of the house looks just as weak, analysts say. "We believe continued capital spending cuts are likely," said Daryl Armstrong, an equities analyst with Salomon Smith Barney, in a recent report. It is the corporate market that has carried Cisco through the sharp drop in equipment spending. Tchuruk says Alcatel is "uniquely able" to serve this same market. Alcatel was among many European companies that at one time was dominant in parts of Europe but noticeably absent in North America. This situation changed with the Internet and telecommunications boom in the United States and neighboring countries in the 1990s. As the Baby Bells moved to offer high-speed Internet access, Alcatel stepped in to satisfy demand for equipment, dominating the niche for DSL (digital subscriber line) gear for companies such as BellSouth and Verizon Communications. Soon after, Alcatel went on a North American acquisition binge, gobbling up companies such as Packet Engines, Newbridge Networks and Xylan in a $16bn bid to update its networking-equipment technology. Alcatel bought struggling optical networking start-up Astral Point Communications for $135m in January of this year. Separately Tuesday, Alcatel said it has started to sell a new line of switching devices for corporations called the OmniSwitch 7000. The OmniSwitch line originated from Alcatel's 1999 acquisition of Xylan.

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