On November 13, 2018, Cisco announced its new Catalyst 9800 Wireless Controller. With this announcement, Cisco now enables large enterprises to manage their WLAN networks from the cloud.
This announcement has several components to it that are interesting.
What's new here is that Cisco customers can control their WLAN networks using public cloud - in particular Amazon Web Services. Up till now, the Cisco Aironet product set has been enabled to run on Controllers, as a virtual software instance on premise, or in "controller-less' capability, called Mobility Express.
Why is this important? Because Meraki (owned by Cisco) operates a very successful cloud-managed WLAN service, enabling management of Meraki Access Points. The larger revenue contributor to Cisco's WLAN revenue is its Aironet product line, which hasn't been cloud-manageable until this 9800 announcement. With the introduction of the 9800 cloud-managed offering, this enables large-enterprises to operate their wireless networks from the cloud. So, Meraki isn't Cisco's only web-managed offering any longer. We think over time, Cisco customers may see the distinction between cloud-managed and premise-located management as blurring.
Our big takeaway from its recent global analyst meeting was that Nokia is formalizing its enterprise business. Of course, the company’s primary business, which focuses on telecom service providers, is undergoing major product updates, including towards 5G, Fixed Wireless Access and towards network slicing. We have published about these topics in other posts relating to Nokia in the past several months, having attended other Nokia events, so we focus on topics we haven’t discussed recently.
The company acknowledges that telco capex is expected to be unexciting and is redoubling efforts to gather enterprise customers. In 3Q18, Enterprise represented 5% of revenues. The company expects 8% CAGR for Enterprise Networking. Of course, the company covered many topics beyond enterprise, including its view on megatrends, the importance of spectrum instead of differentiation between 4G and 5G, residential WiFi and Fixed Wireless Access, its recent wins at major telcos, the impact of the recent re-organization, the impact of the trade war and other topics.
Enterprise market, Private cellular and WiFi. The company’s view is that private LTE will challenge WiFi for certain applications in its “strategic” enterprise markets, including for verticals such as logistics and transportation. Considering the Nokia view, we expect private LTE and WiFi will co-exist in the future. We think that Nokia can succeed with its private LTE strategy, because this is mostly a “greenfield” opportunity. Many of the cases Nokia explains it is seeing success are outdoor, not indoor, where WiFi is so popular. A number of industries are likely to adopt private LTE (mining, logistics are good examples), and later 5G, but we expect most every industry will maintain their reliance on WiFi. We keep in mind that in light of the fact that 802.11ax (which began shipping 3Q18) incorporates many more cellular-like capabilities, WiFi will have a seat at the table for some time to come even in these critical industries. Interestingly, by leveraging service provider channels, the company has plans to enter the “branch” enterprise network market, using SD-WAN as its “Trojan horse” to enter.
Megatrends. From a strategy standpoint, Nokia sees megatrends: Ubiquitous connectivity, multi-cloud, deep analytics, industrial IoT and regulatory.
Spectrum takes on new importance. On mobile radio, the company focuses on spectrum differences as much as the difference between 4G and 5G. The company’s view is all macro basestations should have mmWave. Describing its 5G ramp, Nokia’s factory capacity related to 5G infrastructure has quadrupled this most recent quarter; and the company “went to volume shipments” on its new, in-house Reefshark chips in 3Q18.
Residential WiFi and Fixed Wireless Access. The company’s new mesh WiFi will be made available at its first service provider customer’s stores in the month of November. This mesh technology is from the recent acquisition of Unium. The company’s first Fixed Wireless Access (FWA) customers have begun deployments, for both 4G cellular and WiGig (60 Ghz 802.11ad). We understand that the 4G cellular projects are largely at mobile service providers working to leverage existing investments in their mobile infrastructure, while WiGig is in demand at enterprises and traditionally fixed-line service providers. The company expects 5G FWA infrastructure will be ready to ship in 2019.
Recent wins at service providers. New wins announced €2B around this event include “frame wins” at major Chinese service providers
The impact of the recent re-organization. On the day of its recent earnings call, the company announced a planned re-organization, along with some reductions in force, to reduce spending so the company can hit its year 2020 financial targets. The importance of this re-org, from our standpoint, is that the Software division of the company will be in charge of managing several products that used to be part of the Mobile division beginning Jan 1, 2019. Products moving from Mobile to Software include IMS CSCF and TAS. We have verified that Packet Core (including EPC/4G and 5G Core) will remain in the ION (IP and Optical Networks) division, where it has been for years.
Trade war. According to Rajeev Suri, CEO of Nokia, Australia, UK, Korea, Japan, possibly Canada all may ban Chinese telecom gear. Suri expects that Nokia’s “working assumptions” are that: (a) around 20-25% Chinese market share is available for foreign vendors, and (b) potentially, ZTE will take more share in China, and that (c) foreigners (like Nokia) will still be able to play. Suri explained that Nokia hasn’t seen Chinese vendors get more aggressive in Middle East and Africa (MEA).