Wireless Infrastructure Newsletter
Business Models Enabled by Heterogeneity November 15 2016The introduction set out a picture of the wireless world, in which many types of spectrum and network increasingly work together to create a seamless pool of capacity for service providers, enterprises and consumers to use.
The end of hardware as a mobile business October 14 2016
Exploding handsets aside, Ericsson’s crisis shows the need for all players to accelerate their shift towards software and services
It’s been another week of exploding smartphones, and the growing fall-out from the problems with Samsung’s Galaxy Note 7. Once a flagship product and a genuinely innovative design, the latest Note has turned into a nightmare. Samsung has halted production and the recall and refund process – and more importantly, the loss of future sales – may hit its profits to the tune of $5.3bn.
Of course, Samsung is a big enough company to weather this storm, despite the awful timing, just as its handset business seemed to be in recovery mode. This will likely see it redouble its efforts to shift revenue and profit to non-smartphone businesses like memory, processors and displays, and to try to boost its efforts in software.
The trouble is, while the company is having some success with services like mobile payments, the classic software/content model for a device maker is to use those services to drive additional usage, and upgrades, to the smartphones, by creating an optimized and highly usable experience. Apple is the star at this, and the failure of the new Note – whose pen interface can support some interesting applications – will be a blow to Samsung’s hardware/software hopes.
Google is also chasing that integrated device/services dream with its new Pixel smartphones, just when the model is set to decline. The ascendant players will not be the hardware/software providers, which lock users into a particular device or brand. They will be the web content and applications firms, which can create a differentiated and attractive user experience across a whole range of current and future gadgets.
Amazon is leading the way, because this is its natural territory – despite the Kindles and Fires and Echoes, it is not a device maker and those products exist purely to drive more usage of its content and stores. That also gives Amazon a whole different approach to margins compared to actual hardware manufacturers. As it hurls its rocks at Apple and Samsung – it new low cost music streaming service, tied into its Echo and Prime platforms, is the latest example – it is even more strange that Google, which could go head-to-head in this game, is being distracted by the old-fashioned world of devices.
It isn’t just the device end of the mobile market where the old guard are being squeezed out. Network vendors and operators are faced with painful adjustments too – Ericsson’s huge job cuts of last week were followed this week by news of 3,200 layoffs at Verizon.
Ericsson followed its cuts with a profit warning, turning its investors’ harsh scrutiny on its plan to restructure its business around new realities. Of course, it only has an interim CEO, and a strong new leader is badly needed, but it does have a well articulated roadmap laid out by ousted CEO Hans Vestberg, with a set of targeted growth businesses and a potentially game-changing alliance with Cisco.
However, those growth businesses – which include virtualization, cloud and media – delivered only about $60m of additional revenue in the second quarter, and account for only $1.2bn of sales in a total of $6.1bn. That total is falling (down by $460m in the quarter) and the new businesses are not expanding rapidly enough to fill the gap, hence the cost slashing and general pessimism.
The Cisco deal is not cutting in sufficiently quickly, in terms of sales, to reassure shareholders or many customers, while the new targeted businesses are not greenfield markets where Ericsson can make the rules as it used to do in mobile networks – most of them are already occupied by powerful and defensive companies from IBM and HPE to Amazon. Ericsson has neutralized the potential competition from Cisco and will make other partnerships – or perhaps the big merger it has always resisted really will be on the cards once a new CEO arrives.
Acting CEO and CFO Jan Frykhammar told Bloomberg, after the Q3 profit warning: “This is absolutely not the beginning of the end for Ericsson.” That is likely to be true, even if Ericsson ends up in a merger. After all, its death has been predicted before, most recently in 2003 when its spiralling fortunes were rescued by CEO Carl Henric Svanberg. There is still reason to hope that Ericsson’s next CEO could be as effective as Svanberg in turning the ship, but it will be a big job. As in 2003, the company is not just facing stepped-up competition or seasonal fluctuations – it is in the midst of a complete redefinition of its industry. A decade ago that was centered on the shift to the Internet; now it is about the convergence of telecoms and IT and the rise of the software-driven network and the cloud.
Like Google and Apple, the big RAN vendors are still over-preoccupied with hardware. Of course 5G is important, but the strings of tests and pre-5G announcements – Huawei and Vodafone are the latest to boast of a field trial of the ‘New Radio’, based on preliminary work in 3GPP – do not convince anyone that these companies are ready for the next phase of their industry. Tactile Internet, artificial intelligence, massive IoT, hosted and virtualized RANs, everything delivered from the cloud, network slicing – these will be the foundations of the next wave of mobile and web experiences and business models.
The hardware will need to evolve to support them but it will be an enabler not a business driver in its own right. If Samsung’s exploding phones push the company to step up its software and user experience efforts, it may prove a bonus in the end, and a shift which companies throughout the mobile value chain will need to make too.
Juniper needs to redouble its efforts to win MNOs June 30 2015
BY CAROLINE GABRIEL
Juniper Networks' chances of being acquired by Ericsson, or any other large vendor, look slim now that the Swedish firm has said it will not counteract the Nokia/Alcatel-Lucent deal with a major takeover of its own. And if Nokia's mega-merger gets approved, we can presume that some of Juniper's alliances with the Finnish firm - increasingly important to its efforts in the mobile operator market - will be diluted or ended. So what will Juniper's strategy be, to make itself noticed by the MNOs?
The firm has multiple challenges in this market, but it is essential that it makes an impact on it - as MNOs converge with fixed-line carriers, and mobile services increasingly become the primary driver of network investment, this is no longer the cadet branch of the service provider sector. Yet Juniper must deal with the shift of the whole carrier base towards software-defined networking (SDN), a fundamental shift; the strengthening of ALU, a serious rival in routers, via Nokia's ownership; and the stagnation of some of the enterprise bases where it is well entrenched.
CEO Rami Rahim, who took the helm in November after his predecessor left under a cloud, insists he is not looking for major acquisitions to turn Juniper around, though he may fill gaps with smaller ones, or with partnerships like the newly announced WiFi deal with Ruckus Wireless. Nor is further major restructuring on the cards, Rahim said in a recent interview with the Silicon Valley Business Journal. Now the company's fortunes are all about "innovation", he insisted - but highly targeted innovation, designed to steal a march on Cisco in certain key areas.
The overall focus is on agile and scalable cloud-based service delivery architectures, whether physical, virtualized or hybrid, particularly for service providers and government or financial organizations.
There were signs of optimism, after a year of turmoil, when Juniper turned in a better-than-expected first quarter, though analysts at JP Morgan quickly put out a client note warning that product revenue growth would be "modest" in 2015. This is partly because Juniper is rolling out a wide range of new offerings, which will take time to bed in. In Q1, these included the QFX10000 family of spine switches.
During the current quarter, major announcements have included the latest core router, the PTX1000, announced this week, and the deal with Ruckus, a bid - perhaps a last-chance one - to stay relevant in enterprise and carrier WiFi.
The PTX1000 shows Juniper's difficult balancing act in terms of focusing its development resources and its message - between scaling up its cloud delivery platforms, to be able to handle massive quantities of data, security and applications; and scaling down its physical internet core, an important differentiator since 2012 when Juniper unveiled products to push routers out to the edge, unify wired and wireless access, and even replace some backhaul links.
However, as the network simplifies and the physical core shrinks - while value and competitive edge shift to SDN - Juniper will have to deal with a significant change in revenue mix and margins.
The PTX1000 is a compact, 3Tbps model powered by Juniper's recently announced ExpressPlus chipset. It is designed particularly for distributed peering between operators, which Juniper says cuts response times for applications and increases the reliability of mobile and fixed access, compared to consolidated peering points.
Meanwhile, the Ruckus deal highlights other important aspects of Rahim's strategy - to extend platforms created for the enterprise, from LANs to SDN, into the carrier world rather than treat the two markets separately; and to rely on partners, not inhouse developments, for far more product lines, concentrating internal resources on the core platforms.
Juniper has been left out in the cold by recent M&A activity in the network infrastructure market, but it is going some way to compensate by forming an alliance with carrier WiFi leader Ruckus Wireless - its third WLAN partnership after deals with Trapeze and Aruba.
The deal is likely to replace Juniper's current enterprise WiFi partnership with Aruba, which is being acquired by Hewlett-Packard, probably depriving the router vendor of an important ally in its war against Cisco. HP's move has sparked several knock-on deals already, including Fortinet's acquisition of Meru and a partnership between Aerohive and Aruba reseller Dell.
Ruckus has some useful qualities to help Juniper stay relevant. It is seen as the most aggressive and innovative of the WiFi independents (especially since Ericsson acquired rival BelAir). With its heavy focus on carrier WiFi (it is leading the charge to support Next Generation Hotspot, for instance), it will also offer Juniper a stepping stone into service provider WiFi. It only had 3.3% share of the overall $9bn WLAN deployments market last year, according to Dell'Oro, putting it in seventh place - at least well ahead of Juniper, which was estimated to have 0.5% and only about $36m in revenue. In enterprise and outdoor, Ruckus was in second place behind Aruba with 7%, though its strengths are greatest in the latter sub-category.
In effect, Juniper is backing away from offering its own WLAN products and concentrating on its new partner to fill that gap and therefore to facilitate more sales of products such as LAN switches (a sector in which Juniper was in fourth place last year, Dell'Oro says, with 3% share).
The companies will work together to sell carrier-grade WiFi products to large and medium enterprises. Their offering will be built around Ruckus's ZoneFlex access points and SmartZone WiFi management platform, plus Juniper's EX Series Ethernet swtiches, plus tools and services in security, BYOD (bring your own device) provisioning and onboarding, and network management. These will be based on Juniper's Open Converged Framework, to allow for integration with third party equipment and software.
The partners cited Gartner research predicting that enterprise WLAN spending will rise from $5.3bn this year to $7.8bn by 2019, worldwide.
Dan Rabinovitsj, Ruckus's COO, said: "Juniper Networks provides the wired infrastructure critical for serving as the backbone for the Smart WiFi networks we deliver." Jonathan Davidson, general manager for development and innovation at Juniper, added in the statement: "Building on Juniper's Open Converged Framework, teaming with Ruckus ensures carrier-grade levels of scale and performance through our interoperable wired and wireless solutions to solve the WiFi capacity and coverage challenges that our enterprise customers face."
Juniper has been moving away from creating its own wireless products inhouse in order to focus on its core switch and router business and the important migration to software-defined networking (SDN). Those priorities have made homegrown WiFi a distraction, especially as Juniper's acquisition of WLAN access point maker Trapeze in 2010 did not yield the results it had hoped for.