Download Alcatel Lucent R&D Product Portfolio

Future Research and
Development Portfolio
Corporation :
Division :
Analyst :
Alcatel-Lucent
Wireless Carrier Equipment
Daniel Henkel
Company Facts
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•
•
•
•
CEO: Patricia Russo; Wireless: Mary Chan
HQ: Paris, 80,000 employees, 130 countries
Revenue: €18.6 billion (2006)
R&D: 10 countries (China, India), €2.7bn (2006)
Dec 1, 2006: Alcatel and Lucent merger
Revenues
Vision – Mission - Values
Vision: To enrich people’s lives by
transforming the way the world
communicates
Mission
Values
Ensuring that our custo- Customers First
mers thrive, our business
Innovation
grows, and people’s perTeamwork
sonal communications
Accountability
experience gets enriched.
Respect
Research Strategy & Focus
Bell Labs main R&D facility
• Develop technically advanced products
• Conduct fundamental research
• Create innovations for ALU’s new products
Current focus
• Wireless network modeling
• WiMAX technology
• Next generation cellular networks
ALU SWOT Analysis
Strengths
• Worldwide presence
• IP portfolio
• Innovation capability
• WiMAX leader
Opportunities
• Wireless broadband
• All-IP networks
• Emerging markets
Weaknesses
• Financial situation
• Merger integration
• Product line confusion
Threats
• Few big customers
• FCC regulation
• Fast technology pace
• Strong competitors
Financials
Shares down 47% YoY
• Q3’07: op.margin 1.6%, net income €-258M
• €12.36B market cap, €4B cash position
Markets & Customers
Market segments along wireless network lines
2G voice only
3G voice and data
4G all-IP
Fund/Platform
Main customers: cellular network operators
Opportunities in WISP market
Competitors
Strong worldwide competition
Company
Symbol
Cisco Systems, Inc.
CSCO
Nokia Corp.
NOK
QUALCOMM Inc.
QCOM
LM Ericsson Telephone Co.
ERIC
Motorola Inc.
MOT
Alcatel-Lucent
ALU
Nortel Networks Corp.
NT
Price/$ Market Cap
27.45
166.54B
39.49
151.39B
40.12
65.66B
24.93
39.62B
16.3
37.23B
8.08
18.25B
16.92
7.39B
Asian players growing fast
P/E
21.8
16.12
20.56
9.85
81.09
N/A
N/A
Project Selection Methodology
New Project Sources
• Customer input
• Employee idea process
• Alcatel-Lucent Venture
• University Cooperation
Value Scorecard
Criteria – scale {0, 4, 7, 10}
• Option Value (3)
• Strategic Fit (9)
• Innovation Content (7)
• Prob. of technical success (5)
• Prob. of commercial success (6)
• Core Competency (4)
Resource Limitations
Estimated €2.2bn R&D budget (total)
• At disposal now: €360 million (wireless)
• 2G (10%): €36m, 3G (25%): €90m
• 4G (40%): €144m, F/P (25%): €90m
Full Time Employees
• Not the bottleneck
Portfolio Findings
29 projects evaluated – c:11, o:10, d:8
2G
3G
- HTC handset venture
- GSM base station redesign
- Stop CDMA v1 BS
4G
- LBS for HSDPA network
- US-F inter-cultural training
- Phase out Alcatel WCDMA
Fundamental/Platform
- WiMAX for WISP market
- LTE standards activities
- Exit UMB market
- Cognitive Radio research
- Enhance SDR platform
- Stop DTN research
17 projects funded – c:7, o:8, d:2
Balance Example Plot
Visual Balance - Combined 4G and F/P Buckets
$35
$30
MeshR-o
SDR-o
Project Value / $M
$25
LTEup
$20
BeamMax-o
$15
DTN-d
EVDOrC
$10
WPlanes
$5
TestSect
$$(5)
0
2
LTEStd-o
4
6
8
10
Overall Risk / [0...10]
X – Risk
Innovation Content:
Y – Value Size – Strategic Fit
Superior
High
Medium
Low
Summary & Outlook
• Alcatel-Lucent strong innovator, but
distracted by merger integration
• Tailored project selection methodology
supports financial and subjective criteria
• Currently 17 out of 29 projects funded
• €328M spent, 32M contingency
• Portfolio: strategic fit, optimal value and
balance
• Strong performance expected in 2009