Nokia Siemens Networks (NSN) is selling its optical networking business unit to private investment firm Marlin Equity Partners, a Los Angeles-based private investment firm with over $1bn of capital under management. The new company intends to operate as “an industry leader in the fragmented optical networking sector.” This transaction is another step in the transformation of NSN into a “mobile broadband specialist,” the company said.
The two companies didn’t announce any financial details of the deal, which will result in the Optical Networks business unit becoming an independent company headquartered in Munich, Germany, according to a statement from NSN. As a result of this transaction, up to 1,900 employees – mainly in Germany, Portugal and China – are expected to transfer to the new company in line with applicable local legal requirements. The transaction is expected to close in the first quarter of 2013.
NSN’s optical networking unit sold DWDM (dense wavelength-division multiplexing) equipment, used in operator backbone networks. Its competition includes Alcatel-Lucent, Ciena, Huawei, and (to a lesser extent) Cisco Systems.
“During 2012 Nokia Siemens Networks has made tremendous progress in the transformation of our company to being the world’s mobile broadband specialist. Our strategic focus on our core markets has enabled us to concentrate our energy and investment in areas such as LTE where we have strengthened our global leadership position,” said Rajeev Suri, chief executive officer at Nokia Siemens Networks. “This transaction builds on that momentum and aims to provide a new home for the Optical Networks business with the focus, resources and strategic flexibility to address the opportunities in the optical market.”
This move comes a few months after Ericsson sold its fiber optic access business unit to Calix, including the Ericsson EDA 1500 GPON solution and its complementary ONT portfolio. Here is the press release announcing that transaction.
Ericsson had acquired the fiber access product line in 2007 from start-up Entrisphere for a rumored price of $290M. How much did they get from Calix? In response to a question on the conference call to discuss that sale, the response was “not material.”
These transactions are a complete reversal from the optical equipment mania of 1999-2000 when start-up optical switch, access, metro and tera-bit router companies were being acquired for billions of dollars. Some of them had no sales and others didn’t even have a working prototype. At the time, I was amazed how the Optical Internetworking Forum (OIF) had become “a playground for optical network start-ups,” with upwards of 100 new names attending OIF technical meetings.
Going forward, it appears only two network equipment vendors will have a complete line of wireless and wire-line/optical products – Huawei and Alcatel-Lucent. The optical network market can be divided into access (primarily GPON), metro, and long haul. For sure Calix will be a stronger player in the optical access market now. For metro and long haul, we wonder if the new NSN spin-out will be able to compete with Huawei, Alcatel-Lucent and Ciena, which each offer a broader line of products.