Cisco's Giancarlo on Industry Consolidation
I had a chat yesterday with Cisco chief development officer Charlie Giancarlo,
who talked about a variety of topics, including the recent unveiling of
technology to link emergency services radios in a more cost-efficient
way. With the $2-billion Ericsson-Marconi
deal unveiled earlier in the day, I asked Giancarlo if this is an
indication of much-needed industry consolidation among the larger
equipment suppliers. Here's what he had to say:
“I don't think it's yet a sign of consolidation. We do need
consolidation in the vendor business but Marconi has not been part of
the tier-one environment. The industry, as you know, especially in the
optical space, is over competetive at the moment. There are very few
players that are profitable - Cisco in one, Juniper is another and
others are only moderately profitable, and there probably needs to be
greater consolidation.”
Given Cisco's modus operandi, do not expect it to be the major industry
consolidator. Instead, it will continue to make small but strategic
acquisitions. If anyone's going to make a big move, look to Alcatel,
Siemens or Nokia. There has been scuttlebutt about Alcatel buying
Lucent and Nokia and Siemens looking at Nortel. I think a Nortel deal is
unlikely - unless it receives a blow-away offer, what with Mike Zafirovski
coming in as CEO next month. The board will likely give him a chance
to execute a turnaround before it thinks of entertaining takeover offers. A good clue of Nortel's plans could be Zafirovski's compensation package,
which includes five million restricted stock units and five million
stock options. This suggests he needs some time to improve operations
so Nortel's stock can rebound and make his package even more lucrative.
