Lucent Faces Hurdles Going It Alone

Lucent has IBM as a model of a formerly dominant player that retrenched and found a niche from which to rebuild. It also has the specter of Apollo, Data General, Wang and others — giants that lost their way and never recovered.

Lucents cash from recent bank loans is only enough to keep it liquid through years end at the current burn rate, but there are indications that that rate will improve, said John Gonsalves, vice president at strategy consulting firm Adventis. "Lucent is too large to fail, and Bell Labs still is an innovative engine, the wind beneath Lucents wings," he said.

The key is to focus on the right markets — developing wireless and optical networking products while continuing to sell legacy products — and to get products from research to the marketplace fast.

Analysts say Lucent might listen to a merger bid from a European equipment vendor such as Ericsson, Nokia or Siemens, but that its more likely that Lucent will go it alone, while selling off some divisions. Lucent hopes to get about $5 billion selling its fiber-optics division to one of several bidders, but that may be complicated by objections filed by Corning, which has cross-licensing deals with Lucent on fiber patents.

Speculation is spreading that Alcatel might try a merger with Nortel to get a big North American customer base, minus Lucents debt load.