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Friday, December 21, 2012

Arris' Aqcuisition of Motorola Home Division: Verdict, Please


Arris recently purchased Motorola Home Division. The jury is still out as to whether or not it is a wise purchase.

It was not surprising to see that Google sold the Motorola Home Division. It was clear from the outset that it was a bad fit for Google. As you may recall in previous blogs, I had suggested that Google had no expertise in running a hardware business (http://acgresearch.blogspot.com/2012/10/google-motorola-can-this-marriage-be.html), and it probably had little interest in legacy-type technology.  Although official statements to the contrary, the latest announcement and reports in the press essentially confirm my initial assessment.

On balance, I am positive about this deal. The pros: 
  • Strategically, this acquisition makes sense for Arris because it greatly diversifies its product portfolio and solidifies its presence in Tier 1 MSOs in the Americas.
  • There is some product overlap, (for example, CMTS and QAMs), but it is not that significant, especially given that the majority of Motorola’s revenues are derived from STBs.
  • Arris has technical expertise and credibility within the industry and has experience with the design, manufacturing and selling of cable hardware.
  • Arris diversifies its customer base substantially and reduces its reliance on Comcast and TWC, which are about 50 percent of total revenues.
  • Arris’ management has a good track record and has delivered consistent growth over the last few years.
  • The combined company is sufficiently large to compete effectively with Cisco
The concerns to watch are: 

  • Execution risk: Can Arris effectively swallow a company twice its size? Will it be able to integrate the two companies fast enough to minimize loss of momentum? Will the cultures assimilate?
  • Market risk: Will the combine product strategy/portfolio/roadmap meet the market transitions? Will the economic uncertainty continue to put downward pressure on SPs’ CapEx? 
  • Financial Risk: Will Arris be able to increase Motorola’s historically low margins? Was the price too high?

Personally, I was glad to see Motorola end up in competent hands (the other bidder, Pace, is also a competent player in the space and would have been a good match as well). It was hard to watch the division suffer under the lack of attention, strategic vision and direction provided by Google. While we see this as a positive development, we will not know how it turns out for several years.

For more information about ACG Research's Video Services, contact sales@acgresearch.net.





David Dines
ddines@acgresearch.net

www.acgresearch.net

Mobile Has Gone Mainstream


ACG’s analyst discusses the 2H 2012 Mobile IP Infrastructure and EPC Forecast and highlights trends and drivers in the mobile space and what providers can expect in the coming years.

Global mobile data traffic doubled in 2012 and will double again in 2013. According to a GSMA/Deloitte study, as mobile traffic doubles GDP per capita increases by 0.5%. The mobile industry, globally, is now outperforming total GDP growth because of growth in Android, iOS ecosystems, and penetration of mobile subscriptions in developing countries.

In 2012, the mobile industry has been a tale of two networks. 3G investments are slowing, as operators focus on optimization and plan new investments in LTE, Mobile IP Backhaul, and Small Cells. In contrast, LTE investment has seen it largest growth in 2012 with some vendors experiencing more than double growth in 2H 2012. ACG forecasts Mobile Packet Core (MPC) to grow at 0.6% CAGR by 2017; Evolved Packet Core (EPC) will grow at 53.7% CAGR by 2017. GSMA identified 134 commercial LTE networks operating globally, today. ACG expects this number to grow by 125% in 2013.

ACG Worldwide Mobile IP Infrastructure Forecast
CAGR
Mobile IP Infrastructure
16.6%
MPC Worldwide Forecast
0.6%
EPC Worldwide Forecast
53.7%

North America investment has been fueling the LTE industry, representing nearly half of all global subscribers and Verizon representing one-third of the total. Verizon, Apple, and Samsung and other vendors are dominating the LTE ecosystem, primarily focusing LTE offerings in the US, Canada, Japan, and South Korea. These countries have the majority of users. ACG forecasts major European LTE investments to be delayed by two years as EU member countries slowly allocate 4G spectrum and mobile SPs balance profits and CapEx.

Looking at the future
Significant spending shifts will continue in the mobile industry in the next five years. Mobile SPs are curtailing 3G and 4G RAN spending and reviewing future CapEx outlays with low-cost small cells. Restructured mobile data services and new pricing for 3G and 4G will cause demographic shifts globally; 3G networks in some regions will become value-based offerings for wholesale, machine-to-machine, and low- to mid-market demographic segments.

IP wars will continue in 3G, 4G, mobile devices, and patents as a means to prevent sales and market share gains by Apple, Google, HTC, Microsoft, and Samsung. RIM will divest some of its device business by 2014. ACG predicts BlackBerry 10 will fail in global market adoption at levels forecasted by the vendor. The 3G refurbished device market will continue to grow, especially in the EMEA region. Verizon, Apple, and Samsung will continue to dominate LTE device offerings and mobile ecosystem for next two to three years.

For more information about ACG Research’s mobility services, contact sales@accgresearch.net.

Tuesday, December 18, 2012

Evolving IP and Optical Architectures

ACG Research's whitepaper "Evolving IP and Optical Architectures" discusses the challenges service providers  are facing and explores the pros and cons of next-generation networks.

The inflection point of 100G being deployed in the network creates the perfect opportunity to re-evaluate and optimize your network, click (http://www.juniper.net/us/en/dm/acg-supercore-wp/) here for your free white paper on how today’s network architectures are evolving and how operators will benefit by moving to new and more cost-efficient network architectures.

For more information about Eve Griliches, click here.




egriliches@acgresearch.net 
www.acgresearch
 




Breaking out the Business Case for Software Defined Network

Though much has been said and written about software defined networking (SDN), little has been said about its business case. We know at a high level that the service provider board members of the Open Networking Foundation including Deutsche Telekom (DTE.DE), Facebook, Google (Nasdaq: GOOG), and Verizon (NYSE: VZ) view SDN as a means to reduce their costs and increase service delivery velocity. A more detailed view of the SDN business case can be developed by digging into the cost structures of these large service providers. Click her to read more.

Click here for more information about Michael Kennedy.

Click here for more information about ACG Research's business case analysis services.

To read more of Michael Kennedy's articles on FierceTelecom, click here.




Michael Kennedy
mkennedy@acgresearch.net
www.acgresearch

Wednesday, December 12, 2012

SDN Business Models: Which Will Succeed?

As I see more and more companies enter the software-defined network (SDN) market, my hardware-centric mind struggles to understand the business models of many of these software offerings. After talking to industry experts I have come up with four basic models:

1. Embedded Model. This model is hardware based. System vendors will likely throw in the controller and open APIs for free and price the hardware accordingly; the hardware covers the cost of the software development. This technically obscures the software solution within the hardware price. Benefits of this business approach is that the hardware stays in the network a long time, and additional add-on software features and/or applications and upgrades can be sold at increasing profits. This model will be used by key networking infrastructure vendors as well as SDN start-ups that have hardware-based solutions wrapped together with the controller and applications. This model is likely to be the most successful in the long run, because end users are leaning toward a full software and hardware package versus piecing the components together themselves.


2. Cloud-Based or Application Hosting Model. This model is per virtual machine (VM) and is time based, similar to the Amazon usage-based billing system. Use a number of VMs within a certain period, and the price scales with the usage. There is no tie to specific hardware. It may sound like a low-cost entry approach, but this is likely to be one of the most expensive models because the complexity to evaluate the year-end cost is quite difficult. Additionally, it is likely too expensive for the typical enterprise to embrace given large-scale virtualization deployments are in the very early stages. 

3. Subscription Based. The subscription-based model simplifies things a bit for the customer and enables either a quarterly or annual fee to be attached to the controller and applications purchased. The controller can be separate from the applications or bundled, enabling multiple offerings that are a single price. Upgrades can be priced by quarter or year, which enables up-selling of new applications in a very straightforward format.  

4. Capitalized Model. The capitalized model is where the customer purchases the controller (and/or applications) for a one-time price and capitalizes it over time. This is where you find out where the purchasing power is in the organization. Often the networking team will submit a VM or subscription-based proposal, and the CFO will insist on a one-time price instead.

Several of these business models, in theory, are compelling, but have become extremely complex for the end user to evaluate, specifically, determining what the end cost of the network will be. End users are telling us that the simpler the business model, the more likely the sale, given the CFO influence. Thus, the capitalized model, in many cases, is actually the most popular right now, despite what the market is telling you.

For more information about Eve Griliches, click here.

For more information about ACG Research's SDN services contact sales@acgresearch.net.



egriliches@acgresearch.net 
www.acgresearch
 


Wednesday, December 5, 2012

ECI Delivers on Native Packet Transport

Packet optical transport products were introduced to the market to handle the ever increasing packet traffic in an affordable manner by lowering the cost of transported bit.  However, simple and low-cost packet-based equipment may lack carrier-grade transport attributes. Adding attributes such as protection, redundancy and resiliency to packet-based products has proven to be more difficult than expected, often resulting in higher capital costs related to addressing these requirements.

Managing large-scale networks also has proven to be more expensive than anticipated and operators have started to conduct thorough total cost of ownership (TCO) analysis for their networks, which provide evidence that operation expense (OpEx) is an important factor that impacts overall considerations. In addition, although Ethernet services are growing rapidly, it has become clear that mixed traffic is still running over most networks, and this situation is not expected to change in the foreseeable future. Consequently, operators have found that the overall cost of a packet-based transport network is more expensive than initially anticipated.

See ACG's Product Impact on ECI’s Native Packet Transport (NPT)

For Michael Kennedy's TCO on ECI's MPLS-TP NTP Solution, click here.

For more information about Eve Griliches, click here.




egriliches@acgresearch.net 
www.acgresearch