Will HP buy Alcatel-Lucent?

HP is one of several firms aggressively doing acquisitions. Its latest, EDS, takes it one big step closer to being able to build a cloud-based IT outsourcing business, likely catching most of its competitors by surprise and effectively cornering this market.

Another high-profile HP effort is Halo, which just got an award for environmental responsibility. Given the American Airlines announcement indicating a massive reduction in travel capacity, telepresence systems like Halo have never been more timely. But Halo is a telecommunications product, and HP is not a telecommunications company.

In telecommunications, Cisco, which has a a nicely-branded competitive offering, is better positioned. So, if HP is serious about Halo, and it is, will it buy Alcatel-Lucent (or another telecommunications company) and formally enter this market?

Maybe, but it likely depends on what direction the PBX market will go and whether HP is capable of driving the market in a different direction.

VoIP Killed the PBX

The traditional PBX is dead, having been killed off by VoIP. Products still exist in the market, but like any dinosaur when fatally wounded it takes a while for the beast to die out. And PBXs have a service life measured, like mainframes, in decades.

VoIP is viable and Cisco has been riding this horse successfully; arguably, it is currently the most financially successful company providing a PBX-like solution. This means we are likely at the front end still of what will be a massive change-out across the industry of aging telecommunications offerings. It would be natural to replace a large number of conference room voice-only solutions with telepresence products to gain both significant cost and collaboration advantages and to make sure the two systems can work together.

This suggests Cisco would exit this process with a massive installed base advantage that would be difficult to counter by any company that could not provide a similarly integrated and bundled solution. I should also mention that this should provide additional fuel to what is already a significant network technology upgrade wave.

Alternative Path: Cell Phones?

A large number of companies currently pay for two redundant phone services for their employees: the desk phone and the cell phone. Eliminating one or the other, or at least integrating the two, to reduce redundant connection charges would seem to provide a significant advantage. HP does have a cell phone business and a robust set of phone management tools, but it doesn’t extend to call routing. There is no evidence of being able to create a virtual PBX yet, but that might be an interesting alternative path and one that would have significant cost advantages. Cell phones are vastly more convenient and can be much more effective as communications tools.

Add in technologies like WiMax - which coupled with VoIP could create an opportunity to vastly reduce related charges - and there is the potential for an innovative, disruptive solution that steps outside where current PBX companies and Cisco are positioned.

The Thin Client Angle

Now let’s rethink this a bit. If we look at the future of the smartphone and realize that it will never have the processing power to truly embrace client-side computing, we might suggest another path still, that of a thin client. If we remote the processing, we can provide desktop-class performance on a device that potentially fits in a cell phone performance envelope. It could do both tasks connected to a back-end set of services that would emulate a PBX for inbound calls and outbound call routing.

If we look to HP’s cloud strategy, this solution could, with the exception of the telecommunications technology it would have to acquire, link together a number of strategic HP resources, from wireless thin clients and smartphones to servers and PC blades. This would create the potential for a super cloud-based communications service (which could include e-mail). Once created, it should provide massive economic benefits and give HP a technology lead, assuming it can complete it, that would be difficult for even Cisco or IBM to match.

Will HP Buy Alcatel-Lucent?

Possibly, if HP were Oracle, but HP is much more cautious in its strategy, and this would be a big acquisition. But HP is already buying into the telecommunications market with Halo, and convergence between telecommunications and computing remains inevitable. I think, however, much like it was with the gaming PC segment, someone else will need to make this move first before HP is prompted to follow the same path. There is simply too much risk in being the first mover, and the AT&T/NCR and IBM/ROLM lessons are still too recent.

But I think this is an area worth watching because, at some point, one of the major players will once again move to combine telecommunications and computing. With gas prices skyrocketing, telepresence could be the trigger to making this happen.