Executives say the new investment fund is intended to bring the company closer to developing technologies. Alcatel, whose U.S. revenues make up about 20 percent of its yearly revenue of about $14 billion, expects to invest in companies that make telecommunications or Internet-based equipment.
"The logic is for Alcatel to be closer and have faster access to new start-ups and their technologies," said Patrick Liot, president of Alcatel's Internetworking business, based in California.
Alcatel is one of several international firms hoping to compete against domestic leaders like Cisco Systems, Lucent Technologies, and Nortel Networks in supplying service providers and businesses the equipment they need to build faster networks.
The fund, called the Alcatel Venture Fund, will be headed by Xylan's former chief executive Steve Kim. The company hopes to invest its money in more than a dozen companies within 18 months, Liot said.
Over the past year, international firms such as Sweden's Ericsson and Germany's Siemens have also purchased U.S.-based networking companies as another means of entering the market. Alcatel, for example, has spent about $7 billion the last two years to acquire five U.S.-based networking companies, including Xylan, Packet Engines and Internet Devices, company executives said.