Reorg Spawns New Divisions

Lucent plan combines operations into wireless and wireline units, extends cuts to management

Having let go more than 18,000 rank-and-file workers through voluntary and involuntary job cuts since January, Lucent Technologies Inc. is now focusing on reducing the number of managers, with more layoffs anticipated before months end.

The cuts reflect a shift in strategy aimed at investors who are demanding less niche product promotion and more streamlined operations. The move should have little effect on current users, sources said, but it could make it difficult for Lucent—and other vendors taking a similar tack—to win new customers in a market now accustomed to narrowly targeted offerings.

Jeong Kim, who became group president of the Murray Hill, N.J., manufacturers optical networking unit a year ago, is the first top executive to go. More than 300 other upper-level managers are expected to be included in the latest cuts, sources said.

"Reorganizations are often as much a play to Wall Street as to supporting any kind of efficient organization," said Tom Nolle, CEO of Cimi Corp., a consultancy in Voorhees, N.J.

For old-time telecommunications gear makers such as Lucent, catching Wall Streets fancy during the dot-com bubble days meant trying to isolate and accentuate cutting-edge offerings. Manufacturers tried to showcase divisions with glamour appeal. The strategy, comparable to an auto dealer showcasing a tire at the expense of promoting the whole car, did not necessarily improve sales, Nolle said.

"Ive seen in the past where Lucent has had business units working at cross-purposes with one another," Nolle said. "This [reorganization] appears to be a fairly logical delineation of responsibilities."

Lucents plan consolidates operations into two units: wireless and wireline. The wireline unit, called the Integrated Network Solutions group, will comprise optical, data, switching and software businesses. The Mobility Solutions group will focus solely on wireless.

"What a wireline customer is looking for from us may be very different from what a wireless customer is looking for," Lucent spokesman Bill Price said. "Were trying to match and mirror our customers and the way theyre organizing themselves."

Ridding the company of myriad disparate fiefdoms and decreasing the number of chiefs could spur greater responsiveness. "The bureaucracy that had existed from the days of AT&T [Corp.] had perpetuated itself," said Frank Dzubeck, president of Communications Network Architects Inc., an industry analysis company in Washington. "Reducing management at the top changes the decision-making trail, leading to faster decision making and lower costs."

Analysts said they expect other major equipment makers to launch reorganizations along similar principles, consolidating units that have natural affiliations and eliminating glamorous showcases.

Lucents work force stands at approximately 88,000, down from 123,000 at the beginning of the year. In addition to eliminating 10,000 jobs through layoffs and 17,000 more through the spinoff of Agere Systems Inc., the company last week let go 8,500 workers through a voluntary retirement program. Further layoffs are expected when the company announces its earnings next week.