Sunday, July 7, 2024

Multi-billion dollar deals are reshaping networking

 The first half of 2024 witnessed a seismic shift in the networking industry landscape, marked by a series of major acquisitions that individually and collectively promise to redefine the sector. Several industry giants completed transformative deals, while others announced significant mergers, setting the stage for a dramatic reshaping of the competitive environment. These strategic moves, driven by the pursuit of technological synergies and market expansion, span various crucial areas including optical networking, cloud infrastructure, data analytics, and AI-driven solutions. The scale and scope of these acquisitions – from Broadcom's $69 billion VMware deal to Nokia's $2.3 billion Infinera purchase – underscore the industry's rapid evolution and the high stakes involved in staying competitive. As these business combinations unfold, they are poised to not only alter the trajectories of the companies involved but also to fundamentally transform the networking sector's dynamics, capabilities, and future direction.

The Nokia - Infinera deal

Nokia's agreement to acquire Infinera for $2.3 billion stands out as one of the most recent and notable acquisitions in the networking industry. This deal aims to bolster Nokia's optical networking business, improving its scale and profitability while accelerating product development. The acquisition will strengthen Nokia's technology leadership in optical networking and increase its exposure to the rapidly growing webscale customer segment.

Nokia, with a market capitalization of approximately $22 billion, reported net sales of €22.3 billion in 2023, a 1% year-on-year decrease. The company has been focusing on 5G technology and has recently announced advancements in 5G-Advanced and 6G research. Infinera, on the other hand, generated $1.61 billion in revenue in 2023, a 3% increase from 2022. The company specializes optical transport using its in-house developed coherent digital signal processing (DSP) and photonic integrated circuit (PIC) technologies and leveraging its vertically-integrated model.

Broadcom Acquires VMware

The Broadcom-VMware acquisition, valued at $69 billion, stands as one of the largest tech deals in history and marks a significant shift in the enterprise software and hardware landscape. VMware, founded in 1998, has been a dominant player in the virtualization market since its inception. The company's core technology allows multiple operating systems to run on a single physical server, revolutionizing data center operations. Over the years, VMware expanded into adjacent markets such as cloud infrastructure, networking, and end-user computing. Prior to the acquisition, VMware reported annual revenue of $13.35 billion in fiscal year 2023, showcasing its strong market position.

VMware's journey to Broadcom included several corporate transitions. EMC acquired VMware in 2004, followed by Dell's acquisition of EMC (including VMware) in 2016. In November 2021, Dell completed the spin-off of its remaining stake in VMware to shareholders, setting the stage for Broadcom's acquisition. This deal aligns with Broadcom's history of major acquisitions, including LSI Corporation, Avago + Broadcom CorporationCA Technologies, and Symantec's enterprise security business, reflecting the company's strategy of growth through strategic purchases in the tech sector.

The Broadcom-VMware deal faced significant regulatory scrutiny, particularly from the EU and UK, due to anticompetitive concerns. Regulators worried about potential limitations on VMware's interoperability with competing hardware, Broadcom leveraging VMware's position to favor its own products, and possible price increases for VMware products. To address these concerns and secure regulatory clearance, Broadcom made several commitments, including ensuring VMware's continued interoperability with competing hardware, maintaining open access to VMware's server virtualization software for Broadcom's competitors, and agreeing not to degrade VMware's support for competing products.

Since the acquisition's completion, Broadcom has implemented significant changes to VMware's business model. These include shifting from perpetual licenses to subscription-based models, restructuring partner programs, and focusing on the most profitable customers and products. As of June 2024, Broadcom has signed new agreements with major hardware vendors like Dell, HPE, and Lenovo to continue offering VMware products, indicating a strategy to maintain VMware's market presence while adapting its business model.

Cisco Acquires Splunk

Cisco Systems made a significant push into the data analytics and observability market with its $28 billion acquisition of Splunk. Cisco, with a market cap of about $200 billion, reported revenue of $57 billion in fiscal year 2023, an 11% increase year-over-year. Splunk's revenue for the same period was $3.7 billion. This deal enhances Cisco's software capabilities and expands its presence in the cybersecurity and IT operations management sectors. Cisco has been focusing on AI-driven networking solutions, and Splunk's data analytics capabilities complement this strategy.

The acquisition brings substantial value to Cisco, positioning it as one of the largest software companies globally, particularly in the security and observability sectors. Splunk's technology significantly enhances Cisco's cybersecurity capabilities, providing more comprehensive security analytics across devices, applications, and cloud environments. The merger also strengthens Cisco's position in the rapidly growing AI market, leveraging Splunk's data platform to harness AI more effectively for security and observability. Furthermore, the combined capabilities offer improved observability across hybrid and multi-cloud environments, enabling customers to deliver smoother application experiences.

Cisco expects the acquisition to be cash flow positive and gross margin accretive in the first fiscal year after closing, contributing to earnings per share growth in the second fiscal year. This strategic move aligns with Cisco's vision of securely connecting everything and accelerating innovation in AI-enabled security and observability, helping organizations become more secure and resilient in an AI-powered world.

HPE to Merge with Juniper Networks

The HPE-Juniper merger represents a strategic move that significantly bolsters HPE's position in the networking market, particularly in the realm of AI-driven solutions. This $14 billion acquisition is set to double HPE's networking business, creating a comprehensive portfolio that strengthens its competitive stance against industry leaders. Juniper, long regarded as the reliable "second source" to market-leading Cisco in both enterprise networking and service provider routing markets, brings to the table annual revenue of about $5.6 billion, a substantial addition to HPE's $29 billion in annual sales.

A key asset in this acquisition is Juniper's Mist AI platform, which aligns perfectly with HPE's focus on AI-driven networking solutions. Juniper CEO Rami Rahim has spent the last two years repositioning the company toward the enterprise market, with the Mist acquisition playing a central role in this strategy. The combination of HPE Aruba Networking and Juniper's Mist AI platform is expected to create a formidable offering in cloud-native and AI-native management and control for networking.

The merger is expected to be accretive to HPE's non-GAAP EPS and free cash flow in the first year post-close, with the networking segment set to contribute more significantly to HPE's total revenue and operating income. Beyond the financial benefits, the deal brings strong relationships with cloud providers and enterprise customers, expanding HPE's market reach. By leveraging industry-leading AI, including Mist, the combined company aims to create superior user and operator experiences, particularly beneficial for customers' high-performance networks and cloud data centers.

IBM Acquires HashiCorp

IBM acquired HashiCorp for $6.4 billion, enhancing its multi-cloud capabilities and strengthening its position in the infrastructure-as-code market. IBM, with a market cap of approximately $130 billion, reported revenue of $60.5 billion in 2023, a 2% increase year-over-year. HashiCorp's revenue for the same period was $568 million. This acquisition aligns with IBM's hybrid cloud strategy and its focus on AI-powered solutions for cloud management.

Founded in 2012, HashiCorp is renowned for its suite of open-source and commercial products that address infrastructure automation, security, and management in multi-cloud environments. Key products such as Terraform, Vault, Consul, and Nomad are essential for organizations adopting cloud computing. These tools are widely used by a diverse array of customers to streamline cloud operations and enhance security.

For IBM, HashiCorp brings significant value by enhancing its multi-cloud strategy. The integration of HashiCorp's innovative technologies will simplify the management of complex cloud infrastructures and improve security. This acquisition not only strengthens IBM's portfolio but also underscores its commitment to leading in the hybrid cloud and AI spaces.

The Sale of Spirent Communications

In March 2024, Viavi Solutions announced its intention to acquire Spirent Communications for £1.01 billion (approximately $1.277 billion). Both companies operate in the network testing and assurance market, offering solutions to ensure the performance, security, and reliability of networks. While there is significant product overlap, the two companies also have complementary strengths.

However, the deal faced an unexpected challenge when Keysight Technologies made a higher offer for Spirent. Consequently, Spirent withdrew its recommendation for the Viavi offer, and the Viavi bid officially lapsed on May 24, 2024. Keysight's acquisition of Spirent has since received backing from voters at court and general meetings, though it still awaits final regulatory approvals.

Keep Watching

The networking industry continues to evolve through strategic mergers and acquisitions, driven by the need for enhanced capabilities in areas such as AI, cloud computing, and cybersecurity. These deals are reshaping the competitive landscape, with major players like Nokia, Broadcom, Cisco, HPE, and IBM strengthening their positions through strategic acquisitions. As the industry moves forward, we can expect to see further consolidation and innovation, particularly in AI-driven networking solutions and multi-cloud management. These trends will likely continue to shape the future of the networking landscape, offering more comprehensive and advanced solutions to meet the evolving needs of businesses in an increasingly connected world.

See our full list of Mergers and Acquisitions in the networking sector dating back to 2003.



Tech Update: Future Photonic Interconnects for AI Data Centers

 How is silicon photonics addressing the demands of generative AI?

Vikas Gupta, Senior Director of Product Management from GlobalFoundries explains:

- GlobalFoundries' GF Fotonix integrates electronics and photonics on the same silicon, enabling high-speed networks with low latency

- The technology is designed to be flexible, suitable for pluggable modules, co-packaged optics, and optical interposers

- GlobalFoundries is expanding its ecosystem through partnerships with OSATs and customers to reach an inflection point for co-packaged optics

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Approved Networks adds OSFP 800G DR8 transceiver

 Approved Networks, a Legrand brand, introduced its latest innovation—the OSFP 800G DR8 transceiver.

The OSFP 800G DR8 transceiver provides compatibility for both InfiniBand and Ethernet networks. It delivers ultra-fast data transmission capabilities up to 500 meters. 


Form Factor: OSFP DR8Data Rate: 800 Gb/s (2x 400 Gb/s)
Wavelength: 1310 nmProtocols: InfiniBand NDR and Ethernet
Connector: Dual MPO-12 APCTransmitter Type: EML
Cable Type: Parallel SMFMax Distance: 500 m (1640 ft)
Temperature Range: Commercial Temp: 0ºC to 70ºCDigital Diagnostics (DDM/DOM): Supported
Power Consumption: Max. 16.5 W

"With the introduction of the OSFP 800G DR8 transceiver, Approved Networks is once again at the forefront of innovation in the field of fiber optics," says Brian Patton, VP of Engineering at Approved Networks. "As technology rapidly advances and reliance on data-intensive operations increases, the need for faster connectivity has become even more critical. This transceiver sets a new benchmark by surpassing all expectations and delivering unprecedented speeds of up to 800 Gbps, guaranteeing exceptional performance."

Approved Networks' website cites a list price of US$2,275.


Ericsson records US$1.1 billion impairment related to Vonage

 Ericsson will record a non-cash impairment charge of SEK 11.4 billion (approximately USD 1.1 billion) in the second quarter of 2024, due to lower anticipated market growth rates in Vonage’s current portfolio. This charge will impact the net income after tax by SEK 11.4 billion (USD 1.1 billion) and will be reported in the Enterprise segment.

Niklas Heuveldop, Head of Business Area Global Communications Platform and CEO of Vonage says: “Given deterioration in the market environment and elective decisions we have made to refocus our investments in strategically prioritized areas, we have reassessed certain growth assumptions, resulting in a non-cash impairment of SEK 11.4 billion.”

Niklas Heuveldop adds: “We continue to advance our strategy to build a Global Network Platform for network APIs, which was the strategic impetus for the Vonage acquisition. We recently announced additional partnerships with leading mobile network operators and we see continued positive momentum across the industry. Through this strategy, we are making advanced 5G network capabilities available to the world’s developer community to accelerate the innovation of value-added applications for industry and society. This will open up new revenue streams for our operator customers and spur growth in the telecom industry.”

  • In October 2023, Ericsson announced a non-cash impairment charge of SEK 32 billion for Q3 2023 representing 50% of the total amount of goodwill and other intangible assets from its acquisition of Vonage. The company cited a significant drop in the market capitalization of Vonage’s publicly traded peers, increased interest rates and overall slowdown in Vonage’s core markets as reasons for the charge. Ericsson continues to advance its enterprise strategy, with Vonage’s network API capabilities being central to this strategy and the development of a Global Network Platform (GNP). 
  • In July 2022, Ericsson completed its $6 billion acquisition of Vonage Holdings Corp.  The deal provided Ericsson with a platform for offering a full suite of communications solutions including, Communications Platform as a Service (CPaaS), UCaaS and CCaaS. Ath the time, Ericsson said it aims to transform the way advanced 5G network capabilities are exposed, consumed and paid for. This will provide the global developer community, including Vonage’s more than one million registered developers, with easy access to 4G and 5G network capabilities via open Application Program Interfaces (APIs).

BT implements energy-saving 'Cell Sleep' at EE basestations

 BT Group has successfully implemented energy-saving 'cell sleep' technology across its EE mobile sites nationwide. This move follows successful trials conducted across the UK's home nations. The 'cell sleep' software reduces energy consumption by putting certain 4G LTE capacity carriers to sleep during predicted periods of low traffic, a prediction made possible through machine learning analysis of each site.

The system is designed to automatically wake up during busy periods and can respond swiftly to unexpected surges in demand, ensuring continuous service without interruptions. An even more efficient state, called 'deep sleep,' can be activated during extremely low demand periods, such as overnight. This dual functionality is provided by the RAN equipment suppliers at each EE site, utilizing BT Group's site data to inform the statistical algorithms that manage these energy-saving measures.

BT Group's Chief Networks Officer, Greg McCall, highlighted the significant energy savings potential across their networks, expecting the 'cell sleep' technology to save up to 2 KWh per site per day, amounting to 4.5 million KWh annually across EE’s network. This initiative aligns with BT Group's broader efforts to increase network energy efficiency, which is crucial as the company's networks account for 89% of its total energy consumption. These efforts are part of BT Group’s commitment to becoming a net-zero carbon emissions business by March 2031, complemented by the recent switch-off of its legacy 3G network and upgrades to more energy-efficient RAN equipment.

Key Points:

  • Nationwide Rollout: 'Cell sleep' technology implemented across all EE mobile sites.
  • Energy Efficiency: Expected savings of up to 2 KWh per site per day, totaling 4.5 million KWh annually.
  • Smart Activation: Technology wakes up automatically during busy periods and can handle unexpected demand surges.
  • Deep Sleep Mode: Further reduces power consumption during extremely low demand periods.
  • Net Zero Goal: Part of BT Group's strategy to achieve net-zero carbon emissions by March 2031.

Orange Business launches SD-WAN Essentials

 Orange Business enriches its SD-WAN portfolio by launching SD-WAN Essentials solution designed to leverage connectivity as a springboard to the cloud.

With SD-WAN Essentials, Orange Business supports businesses in gradually migrating their services to the Internet. This modernization is achievable through the simple addition of the SD-WAN Essentials option, natively compatible with their Flexible Internet access. The One Box approach provides the core benefits of SD-WAN services on a single router, ensuring security. The solution offers businesses unified, real-time visibility of their Internet access through a single portal, increased control with application performance indicators, and the ability to allocate bandwidth based on usage and prioritize critical application flows.

SD-WAN Essentials is designed to simplify deployment, reduce the number of necessary devices, and lower energy consumption, providing a significant advantage to companies aligning their digital infrastructure modernization with their CSR approach.

Key Points:

• Enhanced Offerings: Orange Business launches SD-WAN Essentials to improve cloud connectivity.

• Modernization Support: Helps companies migrate services to the Internet with ease and security.

• Simplified Deployment: Reduces equipment needs and energy consumption, aiding CSR goals.

• Customer Success: Frans Bonhomme leverages SD-WAN Essentials for seamless connectivity across 370 locations.

Ekinops is supporting the launch.


NTT DOCOMO GLOBAL gets underway

NTT DOCOMO GLOBAL official launched as a new company to oversee the DOCOMO group's global operations, implementing integrated and agile strategies across various domains. Collaborating with local partners, NTT DOCOMO GLOBAL aims to enhance global quality of life by fostering new lifestyles and contributing to societal and industrial transformations.

The company plans to offer both application and operator-enabling services worldwide, including Web3-based payment solutions and an AI-supported Data Marketing Platform (DMP). Operator-enabling services will feature Open RAN and a global space-based non-terrestrial network (NTN), facilitating telecom operators to revolutionize their businesses. NTT DOCOMO GLOBAL will consolidate existing global investments and seek new investments in companies with strong local market presence. Initially focusing on Southeast Asia and North America, the company plans to expand to Europe and the Middle East in the future. A preparatory company established on May 10 is ensuring operational readiness, with NTT DOCOMO GLOBAL set to commence operations this July.

Key Points:

  • Global Expansion: NTT DOCOMO GLOBAL to drive DOCOMO's global presence and growth.
  • Services: Application services include Web3-based payment solutions and AI-supported DMP; operator-enabling services include Open RAN and NTN.
  • Investments: Consolidation of existing investments and new investments in companies with strong local presence.
  • Market Focus: Initial focus on Southeast Asia and North America, followed by Europe and the Middle East.
  • Operational Readiness: Preparatory company established; operations begin in July.