Lucent Hones Optical Focus

Look which company is back on top in optical transport sales: the much-maligned, nearly written-off Lucent Technologies.

Look which company is back on top in optical transport sales: the much-maligned, nearly written-off Lucent Technologies.

Lucent began gobbling market share in the second quarter, DellOro Group says, moving into first place in optical transport gear sales and doubling its share of Dense Wavelength Division Multiplexing (DWDM) gear.

Credit a slimmed-down customer list and a big change in the bonus structure for the developers of Lucents key optical products.

"We focused on a few big customers, whereas before we had 300 or 400," says Kathy Szelag, vice president of portfolio for Lucents optical group. Ten customers, all huge carriers, comprised 80 percent of the second quarters business, she says.

With that tight focus, Lucent could build a platform to the precise specifications of a Deutsche Telekom or Global Crossing without worrying about whether that platform meets the needs of hundreds of smaller providers. This quarter, Lucent will announce a big win: being chosen by a carrier with specific criteria for a metro DWDM system, Szelag says.

A more dramatic change began in October, though, when Lucents optical networking group broke up its three 1,000-person development teams into 14 autonomous groups of 100 or 150 people. "Their bonuses are a result of their individual business units success. They can see exactly the relationship between their small teams and their products and results," Szelag says.

Lucents optical portfolio board acts as a venture capital firm, considering business cases and seed money requests proposed by team general managers. Team members that develop high-risk, high-reward products get a percentage of revenue.

Lucent was late to market with high-speed optical products in 1999 and 2000 - a mistake that almost killed the company. It declared a $1.9 billion loss for the quarter ended June 30, and expects to cut half its work force by March.

Aberdeen Group analyst Andy McCormick says Lucent has cleared a lot of dead wood, but also has lost plenty of talent in the layoffs, and may have trouble competing with Ciena, Tellium and ONI Systems for DWDM gear customers. "I am expecting that as I track market share, Lucent will slide down the list," he says.

But Network Business Quarterly director Bill Lesieur says the new focus is needed. Lucent "realizes it cannot be all things to all customers and make a profit," he says.