The R&D exit continues

Dan O'Shea, FierceTelecom
06 May 2009


Not too long ago in this space we talked about the potential loss of Nortel Networks as the last of the big, independent network equipment vendors from a past era.

Well, Nortel hasn't given up the ghost just yet, but other major vendors continue to evolve in ways that remove them further from their past reputations.

Today's example is Alcatel-Lucent. Sure, it has been three years since the acquisition was announced, and we are well aware already with how the company has evolved since then and the struggles it has had.

But, in reporting its first-quarter earnings this week, company officials discussed another fundamental change that has been building in recent months, a shift in how much money it spends on R&D and how it spends that money.

Though R&D spending was up in the most recent quarter, the company that owns the proud name of “Bell Labs” plans on spending less on R&D in the second half, and also is re-focusing its R&D dollars away from legacy technologies like TDM switching, ATM, older optics solutions and other technologies, to more state-of-the-art areas like VDSL, GPON, carrier Ethernet, IMS, IP service routers and other segments.

Most interestingly, the vendor giant, which as a primary contractor to many of the world largest service providers holds the key for other vendors to get a piece of those contracts, plans to charge Bell Labs to work with start-up firms and other partners on the kinds of technology innovations that Bell Labs once would have pursued itself - and which once were viewed to have great value, financially and competitively, as home-grown developments.

For Alcatel-Lucent, it's a case of having to change with the times and focus on the most potentially lucrative technologies, though it's also a situation that reflects the move by many larger vendors more into services business and a network maintenance business than the traditional network equipment supply trade on which they have focused.

And so, as we see mega-vendors move away from past identities and toward new identities, we also are seeing them move away from the gritty work and investment required to grow technology from the ground up. But, if they are leaving that task to the start-ups, is it a workload and investment requirement that smaller, younger firms can adequately manage?


Dan O'Shea, FierceTelecom

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