Why is AlcaLu worth less than an app?

Written by on April 17, 2015 in Guest Blog with 0 Comments

BusinessplansDid anyone else notice that Nokia just bought Alcatel-Lucent for less than Facebook paid for WhatsApp in 2014? News broke on April 15 that Nokia has agreed to acquire Alcatel-Lucent for $16.6 billion/€15.6 billion in an all-stock deal. Compare that to news from February 2014 that had Facebook buying WhatsApp for $19 billion – a deal ultimately valued at more like $22 billion. When you contrast news like this it raises a critical question, especially for a mobile operator: why do you still think you’re a phone company?

Think about this: WhatsApp is an APP. At its core, it’s a text messaging app. Sure, it lets you text globally at an extremely inexpensive rate and hundreds of millions of people have downloaded it. But Lucent – in its Bell Labs era – helped put people on the Moon. AlcaLu, despite struggling in the past decade, is still a massive manufacturer of the very durable goods – i.e. network gear – that requires enormous capital and R&D to enable something like WhatsApp to exist. Yet, by the numbers, the market – not just Zuck – values the app over the gear.

Don’t call it a Smart Phone

This dichotomy has to nail home the fact that “telecom” is NOT a phone business anymore. It’s a lifestyle business. The term “smart phone” is an injustice. Call it anything else – a connected device; a pocket computer; an Internet appliance; a “can’t possibly manage my life without it” machine. The phone is just an app; but most of us have 4 or 5 apps on our “life managers” that are different types of phones: Skype, GotoMeeting, WhatsApp, native iOS phone app, and Facebook Messenger, for example. But those sit alongside Netflix, Twitter, LinkedIn, fitness trackers, a dozen games for you and the kids, Uber, Spotify, Dropbox, Starbucks (and maybe some of us have ring timers for spontaneous boxing matches).

Lifestyle companies move fast – or die

The point is – too many operators can’t shake the idea that they are phone companies. That is why we see so much more innovation – and valuation – outside of the telecom industry proper. It’s not just about what’s on the phone – it’s how big communications providers (lifestyle providers whether they realize it or not) operate. Decisions are made slowly and bureaucratically. Keepers of the obsolete status quo hold sway. Products are marketed along the lines of technical brochures, not in terms of the lifestyles they enable. Sales and service processes fail to adopt the most basic, proven tenets the online retail/eCommerce industry have shown to be “no-brainers.” That’s phone company culture. Lifestyle companies move FAST (or they die).

Not rocket science

Don’t buy it? Then ask yourself why a mobile operator would roll out a massive, self-service-based campaign with a website that doesn’t work with mobile devices and no apps to support it? It happens ALL THE TIME.

Lucent may have put people on the Moon, but this isn’t rocket science. Mobile is a lifestyle product. If the devaluation of AlcaLu, in contrast to the over valuation of a text messaging app doesn’t drive that point home, nothing will.

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Edward Finegold

About the Author

About the Author: Ed Finegold is CSO for Validas, a company that specializes in personalized user experiences that leverage analytics-as-a-service to simplify mobile buying, selling, pricing & billing. Ed has been a regular contributor to BillingViews. .

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