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Summary:

Microsoft Corp. and Alcatel-Lucent seems to have decided to enact some of the popular themes seen on day time, thus spicing up the technology headlines this morning. Unless they bury their hatchet soon, this feud is going to end up costing telecoms billions. Microsoft (MSFT) has […]

Microsoft Corp. and Alcatel-Lucent seems to have decided to enact some of the popular themes seen on day time, thus spicing up the technology headlines this morning. Unless they bury their hatchet soon, this feud is going to end up costing telecoms billions.

Microsoft (MSFT) has been ordered by a federal jury to pay $1.52 billion to ALU as compensation over a patent dispute involving the MP3 format. Unfortunately, it is not the only dispute the two companies are involved in. In 2006, Alcatel-Lucent sued Microsoft, charging that Microsoft’s Xbox 360 infringes on some of their video decoding related patents. Stung by the charges, Microsoft sued back, charging that the telecom gear maker had infringed upon four patents mostly related to computer telephony, messaging and video communications.

Now all this would be fine, if it was two aging tech titans were showboating, except there are billions of dollars riding on their “partnership” related to what else, tech-fad of the moment, IPTV.

Back in 2003, I wrote a piece, Gorilla in the Mist, describing Alcatel’s looming domination of the DSL business. While reporting that story, one of things I discovered that Alcatel quietly built up a nice portfolio of IPTV related assets, including some start-ups like ThirdSpace. Mind you – many of them were getting traction at telecoms that were quite worried about cable’s triple play plans.

In summer of 2005, Alcatel dropped a bomb – they partnered with Microsoft, and shifted attention away from their own IPTV efforts related to middleware. The deal was Microsoft would provide the technology, and Alcatel would provide the services. At the time, I questioned the wisdom of the move, and wondered how long before Alcatel decides its folly.

Alcatel, never really told anyone what it did with those middleware assets. If it did take any write-offs, I missed it. Now 2+ years later, the Microsoft IPTV based deployments are slow out of the gate. Recent reports in outlets such as The Wall Street Journal suggest that struggles continue at such marquee carriers as AT&T.

The delays couldn’t be sitting well with Alcatel-Lucent which is facing 12-horrid months – declining revenues and a stock that is likely to behave like a Big Mac consumed after 6-tequila shots. Mark Sue, analyst with RBC Capital Markets in a note to his clients suggests, that the potential rift could prompt someone like Ericsson to try and ingratiate itself with Microsoft for the big IPTV products.

Is Serge Tchuruk realizing that he made a mistake, and hoping that these lawsuits could help him recover some of the lost monies? Nevertheless, if this feud gets any uglier, there are bound to be delays in the IPTV rollouts.

PS: Our soothsayer of the month award goes to Colin Dixon of The Diffusion Group. “”With the situation as it stands today, the Alcatel/Microsoft partnership seems headed for a messy court battle and a very public collapse of the IPTV industry’s most visible partnership,” he wrote in an opinion piece. (via LightReading, November 28, 2006.)

  1. [...] At least for this week, the mobile industry’s largest and most litigious companies laid down some of their arms and gave us oh-so brief warm and snuggly feelings. OK, with the exception of that whole Alcatel-Lucent/Microsoft thing. [...]

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  2. Long Live Homezone!

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  3. [...] has become a whole different company: smart, strategic and opportunistic. Sensing that Alcatel will be mired in the quagmire called Lucent for a while, the company is making a play for the telcos’ television expansion [...]

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