Will HP buy Alcatel-Lucent?

As HP begins to build their cloud-based outsourcing service, the question is raised, “Is the next step to buy Alcatel-Lucent?” Rob Enderle takes a look at that question and forms his hypothesis.

HP is one of several firms aggressively doing acquisitions. Its latest,Guest Posting EDS, takes it one big step closer to being able to build a cloud-based IT outsourcing business, likely catching most of its competitors by surprise and effectively cornering this market.

Another high-profile HP effort is Halo, which just got an award for environmental responsibility. Given the American Airlines announcement indicating a massive reduction in travel capacity, telepresence systems like Halo have never been more timely. But Halo is a telecommunications product, and HP is not a telecommunications company.

In telecommunications, Cisco, which has a a nicely-branded competitive offering, is better positioned. So, if HP is serious about Halo, and it is, will it buy Alcatel-Lucent (or another telecommunications company) and formally enter this market?

Maybe, but it likely depends on what direction the PBX market will go and whether HP is capable of driving the market in a different direction.

VoIP Killed the PBX

The traditional PBX is dead, having been killed off by VoIP. Products still exist in the market, but like any dinosaur when fatally wounded it takes a while for the beast to die out. And PBXs have a service life measured, like mainframes, in decades.

VoIP is viable and Cisco has been riding this horse successfully; arguably, it is currently the most financially successful company providing a PBX-like solution. This means we are likely at the front end still of what will be a massive change-out across the industry of aging telecommunications offerings. It would be natural to replace a large number of conference room voice-only solutions with telepresence products to gain both significant cost and collaboration advantages and to make sure the two systems can work together.

This suggests Cisco would exit this process with a massive installed base advantage that would be difficult to counter by any company that could not provide a similarly integrated and bundled solution. I should also mention that this should provide additional fuel to what is already a significant network technology upgrade wave.

Alternative Path: Cell Phones?

A large number of companies currently pay for two redundant phone services for their employees: the desk phone and the cell phone. Eliminating one or the other, or at least integrating the two, to reduce redundant connection charges would seem to provide a significant advantage. HP does have a cell phone business and a robust set of phone management tools, but it doesn’t extend to call routing. There is no evidence of being able to create a virtual PBX yet, but that might be an interesting alternative path and one that would have significant cost advantages. Cell phones are vastly more convenient and can be much more effective as communications tools.

Add in technologies like WiMax – which coupled with VoIP could create an opportunity to vastly reduce related charges – and there is the potential for an innovative, disruptive solution that steps outside where current PBX companies and Cisco are positioned.

The Thin Client Angle

Now let’s rethink this a bit. If we look at the future of the smartphone and realize that it will never have the processing power to truly embrace client-side computing, we might suggest another path still, that of a thin client. If we remote the processing, we can provide desktop-class performance on a device that potentially fits in a cell phone performance envelope. It could do both tasks connected to a back-end set of services that would emulate a PBX for inbound calls and outbound call routing.

If we look to HP’s cloud strategy, this solution could, with the exception of the telecommunications technology it would have to acquire, link together a number of strategic HP resources, from wireless thin clients and smartphones to servers and PC blades. This would create the potential for a super cloud-based communications service (which could include e-mail). Once created, it should provide massive economic benefits and give HP a technology lead, assuming it can complete it, that would be difficult for even Cisco or IBM to match.

Will HP Buy Alcatel-Lucent?

Possibly, if HP were Oracle, but HP is much more cautious in its strategy, and this would be a big acquisition. But HP is already buying into the telecommunications market with Halo, and convergence between telecommunications and computing remains inevitable. I think, however, much like it was with the gaming PC segment, someone else will need to make this move first before HP is prompted to follow the same path. There is simply too much risk in being the first mover, and the AT&T/NCR and IBM/ROLM lessons are still too recent.

But I think this is an area worth watching because,

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Telecommunications Financing Options for Small Business Telecom Companies

There are three options available to small business telecommunications companies looking for financing. These options are: factoring, asset based solutions and investment capital.

If your small business were a grocery store or automotive mechanic shop,Guest Posting most every lender in the U.S. would immediately understand your business model. If you were to approach them looking for a line of credit, they would be able to rather quickly determine if your business is able to receive some small business financing from them or not. However, as the owner of a telecommunications company you know that this is not always the case for your industry. Traditional lenders just simply do not understand how telecom companies do business and the intracacies of telecommunications funding.

If you are a large multi-national telecom company, funding abounds for you just simply because of the huge amount of revenue your business generates month after month. However, if you are a small telecom business, obtaining that line of credit can be much more difficult. When you approach a traditional lender for funding, you will likely find that they do not understand your business model and telecommunications financing in general. It is not in the traditional banker’s interest to work with telecommunications businesses with receivables that are all small amounts with many customers. Generally, your receivables take 45 or more days to receive after delivery of services. Because these billing issues are unique to the telecom industry, traditional lenders do not fully comprehend the fine details and tend to choose to deal with businesses in more traditional roles.

Once your small telecommunications business is on solid ground, and you are looking to expand your market base, there are three options readily availablec to you for obtaining small business financing. These three options are: factoring, asset based solutions, and investment capital. Let’s take a quick look at each of these options:

Factoring: Factoring is a financing process which allows your company to borrow money against its receivables; your receivables are used as the collateral for the loan. The down side to traditional factoring is that this type of funding generally comes with high interest rates. By finding a lender with telecommunications financing experience, you can sometimes find a lower rate. This makes factoring a strong consideration only if you are able to locate a specialized lender with telecommunications financing experience.

Asset Based Solutions: Asset based funding solutions involve using your existing contracts, equipment, and other assets, as the collateral for your funding. This can be a good option to consider if you have a lot of assets or large contracts to leverage. However, if you own a very small local telecom company, your company may not have the assets or contracts to make this form of funding work. In that case, investment capital may be a good option to consider.

Investment Capital: If your business is open to the idea of investment capital, versus a traditional line of credit, investment capital can be a win-win situation for everyone.

While finding small business financing can be challenging in the telecommunications industry, it is not impossible. When it is time for your small telecom company to expand you should consider factoring, asset based solutions, and investment capital as possible options. Whatever your decision may be, as long as it fits within your long-term business plans, then you are sure to succeed.

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