At the risk of sounding like I'm looking to bash Alcatel-Lucent (NYSE:ALU), I have been thinking more about the company's recently-announced restructuring efforts and wondering if they will help the company as much as they may help the company's rivals. The “law of unintended consequences” is real, and though there are sound motives for the company's moves, it nevertheless could backfire. To that end, I have to wonder if Ericsson (Nasdaq:ERIC) and Huawei are poised to reap the most benefit from Alcatel's self-improvement plans. SEE: Will A New Alcatel-Lucent Plan Lead To Better Results?The End Of “Soup To Nuts”It wasn't so long ago when equipment vendors thought there were significant advantages in being “end to end” vendors for telecom service providers – offering pretty much all of the equipment and services needed to build, operate, and maintain wireline and wireless networks. Given the bankruptcy of Nortel and the hardships seen by the likes of Alcatel, Ericsson, Nokia Siemens Networks, I'd say that being big wasn't any particular shield against hard times in the sector.Now that philosophy seems to be unraveling at least in part. Due in part to the fact that neither Nokia (NYSE:NOK) nor Siemens (NYSE:SI) could stomach the ongoing underperformance at NSN, the company concentrated its focus on mobile broadband, and has being doing much better since. Now Alcatel is looking to go the same way with a new focus on IP networking and broadband access, while selling off other businesses.This may well be a case of “easier said then done”, though. As was pointed out in an editorial in FierceBroadbandWireless, Alcatel tried to slim down its operations back in 2006, but customers rebelled. Alcatel ultimately decided that the customer(s) is always right and abandoned those plans, arguably to its own detriment. So will Alcatel management once again find that they are putting the company's market share in areas like CDMA, mobile backhaul, and/or optical at risk by winnowing out the less promising businesses?SEE: China Unicom Stands At NeutralDown To TwoAssuming that Alcatel-Lucent does go through with the restructuring as laid out this week, Ericsson and China's Huawei will be the only two end-to-end vendors left in the market. As mentioned before, NSN streamlined a little while ago, while ZTE lacks the service elements to go with its hardware. Then there are the various other players like Juniper (Nasdaq:JNPR), Cisco (Nasdaq:CSCO), and Ciena (Nasdaq:CIEN) that compete in particular segments of the market.All told, I wonder whether this ultimately benefits Ericsson the most, at least among carriers who feel as though they still need end-to-end vendors. With all of the concerns about spying from China, the North American and Western European markets have gotten less hospitable for Huawei and ZTE lately, leaving Ericsson as the potential beneficiary.It certainly doesn't hurt that Ericcson is the global leader in wireless market share (close to 40%), with particular strength in LTE and the U.S. While Alcatel has recently made some gains in CDMA, does any of that flow back to Ericsson with this restructuring? On the other hand, Ericsson isn't involved routing and switching or optics (but Huawei is), so there may only be just so many routes for business to flow away from Alcatel and toward Ericsson. Turbulence Usually Favors The LeadersUltimately, I do believe this restructuring is going to be good news for many of Alcatel's rivals. With management focused on selling assets, cutting costs (including firing workers), and perhaps preserving existing customer relationships, this opens an opportunity for Ciena, Cisco, Juniper, and Ericsson to aggressively target Alcatel accounts in optics, routing/switching, mobile packet core, and wireless.Along those lines, if there is still any validity left in the end-to-end vendor concept, it would seem that Alcatel-Lucent's efforts to restructure and refocus could ultimately be a boost to Ericsson's recovery plans. With Alcatel going into a significant restructuring just as demand for telecom equipment seems about to recover, this could be a good time for investors to once again consider the merits of Ericsson as an investment.


Tickers in this Article: ALU, ERIC, JNPR, CIEN

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