Lucent Faces Hurdles Going It Alone

 
 
By eweek  |  Posted 2001-06-04 Email Print this article Print
 
 
 
 
 
 
 

When Lucent Technologies walked out of merger talks with Alcatel last week, it took a giant leap for independence, but only one small step toward actually making it on its own.

When Lucent Technologies walked out of merger talks with Alcatel last week, it took a giant leap for independence, but only one small step toward actually making it on its own.

Lucents comeback is by no means a sure thing, analysts said. "Its couched in how well they do recovering in areas where they failed, and in building only what they can sell," said Pat Hatton, senior analyst at telecom market research firm RHK.

Lucent needs to focus its business plan, as do fellow giants Cisco Systems and Nortel Networks, said Marian Stasney, an analyst at The Yankee Group. "They all need to return to basics, figure out what they do best and execute," Stasney said. "Im not sure the current administration at Lucent has figured this out. Due to its Bell Labs heritage, they continue to act like an elitist research group, rather than a major retail giant."

Here are some other things Lucent has to do, analysts say:

  • Settle lawsuits by shareholders that could distract management and drain resources, and win lawsuits over vendor financing.
  • Find a talented CEO who wont bypass an enormous challenge.
  • Find more customers for its wavelength router, which has won good reviews but needs more revenue.
  • Parlay its DSL deal with Qwest Communications International into other DSL deals, providing more profit.
  • Win more wireless business, like the recent $5 billion Verizon Wireless deal.
  • Reposition with new Internet Protocol (IP) strategy and architecture.
  • Work the kinks out of its softswitch, key to keeping service provider customers that migrate to voice-over-IP. 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.

  •  
     
     
     
     
     
     
     
     
     
     

    Submit a Comment

    Loading Comments...
     
    Manage your Newsletters: Login   Register My Newsletters























     
     
     
     
     
     
     
     
     
     
     
    Thanks for your registration, follow us on our social networks to keep up-to-date
    Rocket Fuel