Some of the largest enterprise networking vendors are branching out from their traditional markets, looking to reinvent themselves as broadcasters. This could provide them with sustaining new revenue streams, as their fixed-line telephony business begins to wither.
Internet Protocol Television (IPTV) is being touted as the key to telecommunications carriers’ opportunity to reinvent themselves as broadcasters. And IPTV (not to be mistaken for video over the Internet; IPTV uses the same protocol as the Internet but its own, carrier-controlled network) is expected to create enormous demand for networking equipment.
If the prediction that 25 million people worldwide will be watching IPTV by 2010 comes true, there will be plenty of demand for fresh infrastructure – especially in China, which is to account for the majority of the market.
So who will be the main benefactor of this networking boom, the telcos or the network equipment manufacturers? Swedish telecommunications operator Ericsson’s $2.1 billion acquisition of Redback Networks, the US-based manufacturer of edge routers which connect users to the network, underlines its determination to win.
This acquisition frees Ericsson from its dependence on the likes of Cisco and Jupiter in building IPTV networks. Ericsson has conducted an extended trial for a forthcoming IPTV contract from AT&T, and analysts report that this acquisition improves its chances of closing the deal.
The broader impact of this competition to capitalise on IPTV depends on consumer take-up. But this acquisition demonstrates that large telecommunications carriers see the medium as an opportunity to protect their dominance of telecommunications networks.
Meanwhile, network services provider Level 3 Communications bolstered its capability to support companies providing rich content over the actual Internet with its acquisition of the content delivery network services arm of IT services company Savvis.
The size of the bet being made on this market is shown by the $135 million price tag Level 3 is paying: that is $2.7 million per employee.
Elsewhere, it is becoming apparent that IBM is forging ahead with plans to fully divorce itself from its former PC manufacturing arm, now known as Lenovo; similarly it has started to withdraw from the printing market. IBM’s print arm has now become a joint venture, named InfoPrint Solutions, with Japanese printing equipment manufacturer Ricoh.
Ricoh has paid $725 million for a 51% stake in the division, and will gradually purchase the remaining 49% stake over the next three years, according to IBM.
