French consumer electronics company Thomson Multimedia SA and telecoms equipment maker Alcatel SA have unveiled plans for a joint venture uniting their businesses in home telephones, internet communications devices and cable modems, and targeting the emerging digital home network (DHN) market.
The new company, as yet unnamed, brings together the largest vendor of TV sets in the US with the number two in telecoms equipment supply in Europe, with initial revenue of $800m a year, split 60% in the US, 30% in Europe and 10% in the rest of the world.
It will lean on the existing brand strengths in different geographical areas, explained Al Arras, Thomson Multimedia’s executive VP for the audio and communications strategic business unit. In other words, its products will sell under the General Electric and RCA brands in the US, going under the Alcatel brand in Europe and the rest of the world.
Though the new company will be a 50/50 joint venture, Thomson Multimedia’s greater contribution in terms of revenue will be reflected in the fact that it will have management control, holding one more seat on the board than Alcatel. Arras said that, after yesterday’s memorandum of understanding, the two parents expect to complete due diligence and receive the necessary approvals from regulatory bodies by the end of September. That would enable the new outfit, with its headquarters in France, to start operating as a unit in the fourth quarter.
Olivier Houssin, executive VP of Alcatel’s enterprise and consumer group, said the new company’s product and marketing roadmap will resemble a three stage rocket. First the groups will be merging their operations in traditional telephony, including both corded and cordless phones, as well as analog modems.
In a second stage, the new venture will be launching internet-related new terminals: screen phones, email phones and internet webstations. At the same time, it will launch the ADSL modems developed by Alcatel and cable modems from Thomson Multimedia.
The third phase will be to position the company in digital home networking, said Houssin, to interconnect terminals for LAN and WAN communications, together with the domestic gateways onto the internet. The new company will not, however, be venturing into the more video-centric, broadband-type of networking. That’s not the scope of the joint venture, said Patrick Liot, president of the professional and consumer division at Alcatel.
Also outside of the new venture’s remit are mobile phones, which Houssin explained by virtue of the fact that Alcatel is entirely in the Euro-centric GSM standard, with no intentions of entering CDMA, neither company would have much to contribute to the other’s business.
In production terms, 90% of what the new company will bring to market will be from outsourced suppliers, primarily in Asia. Only two proprietary manufacturing facilities are included in the business, and in both cases their raison d’etre is a supply contract with an incumbent telecoms carrier. One plant is in Spain for sales to Telefonica SA, the other in Mexico to supply Telmex SA.
The name of the new company will be of only limited importance, since its products will all appear under established brand names. Of greater importance, but also yet to be revealed, is the probable market capitalization of the new company, which will, the partners stressed, do its own financial reporting, distinct from either parent.
Still to be determined by the new company is which of the plethora of proposed standards for home networking it will support. That did not seem to be worrying the partners yesterday, however. Don’t forget the power of our three brands in the marketplace, and their consequent capacity to drive standards, remarked Mike O’Hara, vice-president of worldwide multimedia products at Thomson Multimedia.
