While Nokia continues to sell optics solutions, and fibeReality even sees the possibility for a significant upside for it in the space in the short term, its legacy, its heart, and most importantly, its top-level executives, are rigidly tied to the wireless business. If there happened to be a company based in France interested in purchasing its optical products, we are pretty sure it would have happened a while ago, just as it divested such assets, when it was part of NSN. The biggest problem is the apparent lack of sufficient appreciation at the top that 5G wireless is not only mostly about fiber transmission, but the ability to control the interaction between the two technologies has never been more important. So, while the corporate brass appears to be overly obsessed in preventing capable optical people from the original Alcatel-Lucent to gain a foothold with a little power, they wind up alienating them instead, such as ostensibly, an important technologist, who recently left the firm. In a nutshell, we firmly believe that Nokia is paradoxically hurting its future prospects in its traditional market segment.
On our first point, as Infinera will be juggling more products than ever for an indeterminate amount of time, various customers with an installed base of its gear and/or of Coriant, are undoubtedly in the process of reassessing their network strategies. Despite optics playing a secondary role at Nokia, European operators in particular, will still tend to view the supplier as a safe choice, despite bouts of bureaucratic inertia. We also expect to see a targeted effort in North America, which we also anticipate has a high probability of being successful.
As regards to the need for a greater collaboration effort between Nokia’s wireless and optical divisions, taking a look at what Verizon is doing is instructive. It has become increasingly clear the necessity for a strict, coordinated effort on infrastructure that goes beyond just cost considerations. Even when it comes to the metro optical (although we still see the public-private partnership, Metro-Haul as overkill), the more likely candidates, especially Ciena, and perhaps even Cisco Systems, have not been chosen as part of the 5G contracts.
Although Verizon has its own bias when it comes to being terribly wireless-centric, and ECI Telecom is a capable firm, it appears similar to the relationship between Calix and Ericsson, in that ECI is likely to take a hit on margins. The key point is that Ericsson will oversee all of the active infrastructure, including on the packet side with Juniper Networks, because of the colossal task ahead on 5G.
Theoretically, Nokia could have used the EU loan for 5G research to assist in financing the fronthaul idea from the “Alcatel-Lucent” engineers. It was a 100-gig DWDM with direct detect transmission, and a component firm would have been used to construct the QSFP28 module. Interestingly, despite having inhouse capability, the idea was to go with a merchant DSP supplier, which we hypothesize may have been an initial indication that the optical folks involved with the project wanted to spread out the costs as much as possible in order to increase the chances for approval.
Undeniably, the need for such a solution would have been early, but such gear could have allowed the vendor to potentially leapfrog the competition to the next generation of fronthaul technology. We had heard that the response from Nokia was that the project did not have any legs, which in our opinion, was an insincere reply, as it would have obviously added value to its 5G wireless portfolio.
As always, fibeReality does not recommend any securities, and this writer does not invest in any companies being analyzed by us.
To follow us on our totally separate, quick update company blog, which is exclusively on fibeReality’s LinkedIn page, please click .
[written by Mark Lutkowitz]