French telecommunication equipment maker Alcatel SA will sell its European enterprise distribution and services business to Los Angeles-based Platinum Equity, a venture capital firm that focuses on buyouts of technology companies, the two companies announced Wednesday.
Alcatel wants to focus on its core business, the development and marketing of networking technology, rather than on distribution, said spokesman Klaus Wustrack, adding that the deal should not disrupt relationships with existing customers, and that service quality will not suffer as a result of outsourcing to partners.
"I really think the customers will benefit from this multichannel approach overall," he said. "First of all we have a very intensive qualification system, a certification program, for business partners. They have to make an investment, financially and in training themselves. We on the other hand are keeping a strong service organization, with (toll-free) 800 numbers, with everything you need to help service the partners. ... It's not as if the customers won't be able to talk to us anymore."
He refused to give financial details of the deal, noting that Platinum Equity is privately held, but added that the distribution business, which serves 400,000 business clients in 17 European countries, brought in revenue of 1.5 billion (US$1.3 billion) last year.
Under the terms of the acquisition, Platinum Equity subsidiary NextiraOne LLC will distribute Alcatel enterprise voice and data services in North America.
"The U.S. market has been a target market for us," said Wustrack. "We have been very successful in the operations market, be it DSL (digital subscriber line) or large equipment to the Baby Bells (U.S. regional telecommunication operators), but we still have to expand our enterprise business."
Among the enterprise products the company hopes to distribute widely through the deal is its IP-PCX (Internet Protocol-Private Communications Exchange) platform, which enables businesses to communicate via IP with different business locations, outlets, and subsidiaries, he said.
Alcatel's decision to turn its distribution operations over to others is in line with moves by competitors, such as 3Com Corp., said analyst Lars Godell of Forrester Research Inc.
"I think it's a smart move, because otherwise you have all kinds of channel conflicts, and you could question whether it's a core competence for an equipment maker to also focus on distribution," he said. "That type of outsourcing for lots of types of electronic goods is spreading quite widely."
The Alcatel-Platinum Equity deal is set to close by the end of next month, pending regulatory approval.