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Not surprisingly, the Lucent Technologies-Alcatel deal got called off, allegedly at the last minute.
That it took so long for the deal to unravel shows just how adrift Lucent has become in its shocking downward spiral. From the beginning, it was clear that Alcatel was the acquisitor and Lucent the acquired. Thats what 58 percent ownership confers. What was the last big Euro-American merger of equals? DaimlerChrysler? Did Lucent CEO Henry Schacht ask Chrysler CEO Robert Eaton about Daimler-Benz Chairman Jurgen Schrempp?
That the deal fell apart is a good thing. A day after the deal came unglued, Alcatel announced a $2.6 billion loss for the second quarter. And Lucent had to start scrambling again to sell assets or raise capital. Debt payments and operations could, by the end of this year, eat up all the cash that Lucent had on hand at the end of March. By the time these two finished meshing operations, the telecom world could have been treated to one big disaster, instead of two separate smaller ones. Who would have picked up the pieces of that one?
Whats saddest about all this is how little thought seems to have been given to the one Lucent asset that really matters in the long term. That, of course, is Bell Labs.
Bell Labs is one of the great creations of American capitalism. Basic research and applied research, at the same time, spawning innovation that ripples through all forms of communication — from the telephone network to computing to music to television.
In the 20s, these labs found ways to reduce distortion and improve frequency response in electrical recording, leading to the long-playing disk. It also publicly demonstrated the ability to transmit pictures and even TV transmissions over telephone wires, sending images of Herbert Hoover from Washington, D.C., to New York. And you thought broadband content was a recent innovation for copper phone lines.
The artificial larynx, stereo sound transmission and speech synthesis machinery were all Bell Labs innovations.
Just after World War II, three Bell Labs scientists, including the famous and infamous William Shockley, invented the transistor — as big a breakthrough in electronics as there has been. Bye-bye vacuum tube. Hello, a few years later, to the semiconductor, where transistors and the paths that connect them eventually could be made into one integrated circuit from a single material.
Former Bell Labs chieftain Arno Penzias even helped confirm the Big Bang theory, winning a Nobel Prize for finding the faint cosmic radiation that indicated the explosive beginnings of the universe as we know it. Today, such “far-out” research even extends to looking at the “dark matter” that may well make up most of the substance of the universe. Unix, high-definition TV, the all-optical communications switch — the hits just keep on coming.
Indeed, Bell Labs is still an idea powerhouse, filing for an average of four new patents per day. The nations spooks even rely on Bell Labs to help with encryption and eavesdropping techniques. On almost every front, this operation still is one of the nations most relied-upon resources.
Yet, how times change. Not much more than a decade ago, Robert Noyce, the fellow who followed the Shockley teams creation of the transistor with the development of the semiconductive integrated circuit, was head of a microchip industry consortium called Sematech. This was an organization funded by the U.S. government and major U.S. chip companies, in an effort to keep innovation in a critical industry inside this countrys borders. A similar undertaking, the Microelectronics and Computer Technology Corp., also called the MCC, led efforts to pool basic research.
The idea was that competition between countries was no longer simply military — it was intellectual. And nowhere was the competition keener than in computing and communications. Electronics form the basic nervous system of modern powers. Knock out communications, and you knock out the ability to act.
Yet the potential sale of Bell Labs — the greatest of the communications labs and the one that tackles the toughest original questions vexing networking — raised neither hue nor cry. Its just another corporate asset, to be dealt away with in times of distress.
If Schacht wants to leave any legacy before dismemberment, destruction or disintegration overtakes Lucent, it should be that he at least saved Bell Labs.
Spin it out or sell it, Henry. Now. To some outfit or investors that can care for it. Here.
Before things get any worse.
Tom Steinert-Threlkeld is Vice President of Ziff Davis Medias Business Media Group and a former Editor-in-Chief at Interactive Week. He can be reached at [email protected].