TMCnet
ITEXPO begins in:   New Coverage :  Asterisk  |  Fax Software  |  SIP Phones  |  Small Cells
 

Publisher's Outlook
March 2002

Rich Tehrani

Lucent, A New Course On Stormy Seas...

BY RICH TEHRANI


Like any other market, telecommunications (including next-generation telecom) is a cyclical one. Unfortunately the hype and hope that was generated in the late 90s and that lasted into the early stages of this decade caused many otherwise sensible business managers to irrationally make decisions that would come back to haunt them sooner than later.

Take for example, N.J.-based Lucent Technologies (www.lucent.com). Here is a company that was spun out of AT&T with the highest of hopes. Immediately, an investor darling and a symbol of all that was good in the new economy, Lucent made a lot of people a lot of money before the bottom fell out. For one thing, Lucent had a broad portfolio of products targeted at several different markets. This made tremendous sense since the company, for example, would be able to weather a downturn in the enterprise market by leveraging their relationships with the service provider community, and vice versa. Alas, emboldened by myriad analysts predictions that the service provider market was the battleground of choice, Lucent set about spinning off their slower-growth business, which served the enterprise market. Thus was born Avaya (www.avaya.com).

Unfortunately for Lucent, the service provider market tanked, and combined with a slew of problems including the questionable choices of loaning small carriers millions of dollars with which to finance purchases of Lucent equipment, it spelled doom for the erstwhile high-flying company. The problems of this company are by no means unique, and the market affected many of their rivals to an equally great extent (see Nortel, Cisco et al), but the spinning off of Avaya was, at best, a case of unfortunate timing, and at worst, a blunder of epic proportions.

A Deep Draft Means Stability In Rough Waters
By keeping a foot firmly planted in both the service provider market and the enterprise space, Lucent could have leveraged development dollars across multiple product lines. Also, many of Lucents customers were the larger enterprises, whose purchases rival those of small startup carriers. By keeping a pipeline to these customers, Lucent would have been able to sell through the headquarters to all the branch offices along the line. But by separating out their enterprise business, and in effect, betting on the service provider market, Lucents gamble did not pay off.

Unfortunately for Lucent, the pendulum has swung away from the service provider market and firmly into the enterprise space, as evidenced by the growing success of companies focusing on this arena. Avaya, Cisco, Siemens, Nortel all of these vendors are enjoying revenue derived from enterprise sales as they wait for the service provider market to come back into play. And theres no question that it will come back, the only variable is when. Will Lucent have the necessary financial strength to move aggressively when the market returns? Or will they be unable to compete in a market they once dominated?

Setting Sail With A New Captain
Some signs are promising. Lucent has appointed Patricia Russo to serve as President and CEO. Ms. Russo is coming off a short stint as COO of Eastman Kodak, returning to Lucent where she has served in various executive posts in the past. A founding executive who helped organize the spinoff from AT&T, Russo served as Executive Vice President and CEO of Lucents Service Provide Networks division as well as executive vice president of Lucents Corporate Operations. Some critics are wary of her ties to the Rich McGinn days of the company, but supporters are betting that she has what it takes to right this listing ship.

Russo succeeds interim chairman Henry Schacht who has already taken steps to try and shore up the companys future. On his way out the door, Schacht said investors should expect a challenging start to fiscal 2002, but promised a return to positive cash flow and profitability soon. Of his successor, he had this to say, Pat has all the skills Lucent needs right now. She understands and embraces [Lucents] strategic and restructuring plans, and she can step in as CEO without missing a beat.

The Forecast?
Only time will tell if Lucent, with Pat Russos hand on the tiller, will weather these stormy seas. As for the service provider market, it too will be back. It may take some time for the carriers to wade through their inventory of newly acquired telecom gear, but that time will come. Lucent, who has a tremendous history of selling to the biggest customers in telecom, might once again be in a position to dominate the market. But so much depends on their ability to wait out this down market. While their competitors are selling into the enterprise space, generating much needed cash, and (one assumes) investing in the research and development of next-generation solutions, Lucent is still focusing on restructuring. If only they had a world-class enterprise equipment division. Then the outlook might be a little bit better. 

[ Return To The March 2002 Table Of Contents ]



Today @ TMC
Upcoming Events
ITEXPO West 2012
October 2- 5, 2012
The Austin Convention Center
Austin, Texas
MSPWorld
The World's Premier Managed Services and Cloud Computing Event
Click for Dates and Locations
Mobility Tech Conference & Expo
October 3- 5, 2012
The Austin Convention Center
Austin, Texas
Cloud Communications Summit
October 3- 5, 2012
The Austin Convention Center
Austin, Texas