Alcatel-Lucent (ALU) recently announced that it is entering the core router market. This was expected since the company started on the FP3 chipset last year. The router will be called 7950 XRS (Extensible Router System), and will come in three models: the 7950 XRS-40, 7950 XRS-20 and 7950 XRS-16c. It took Alcatel-Lucent more than three years to develop these product lines. The company has been selling routers for the past decade, but seems unable to capture the market. This guarantees additional revenue streams for a company.
This announcement shakes up the area that Cisco (CSCO) and Juniper Network (JNPR) have traditionally dominated. This is also timely as other major equipment vendors are currently restructuring their businesses to adapt to lower demand in markets as operators are switching from 3G networks to LTE. For example, Nokia decided to focus on more profitable LTE contracts with its recent deal with T-Mobile USA after it struggled with repeated losses. Ericsson also has a solid grip on the US LTE market, but is still encountering difficulties.
The move is also seen to capture the increasing demand for online video and data. The rise of smartphones and tablets is the main driver for this one. At the same time, the rise of cloud based services and personalized content is also one of the driving factors. This scenario forces network operators to accelerate their capacity upgrades to adapt to both consumer and corporate needs.