A Positive Sign for Lucent

We're sometimes accused of bashing Lucent Technologies Inc. (NYSE: LU) here at Heavy Reading, despite the copious evidence we're happy to provide to back up our analyses. But if you're a Lucent employee, customer, speculative shareholder, or just a cheerleader, please read on: The following commentary is actually very pro-LU!

The secret is more or less out about the CBX 3500, Lucent's next-generation, ATM-based multiservice platform. In terms of configuration, it's based on a pretty typical, perhaps maybe even a conservative hardware design – although that's hard to judge, since Lucent won't disclose any details about the product until it is officially ready for commercial launch.

But there are three positive things that we already know about the CBX 3500.

First, it appears to have been designed with carriers in mind. Since we don't know the details of the architecture just yet, I have to base my impression on small clues, such as the fact that the 3500 uses a midplane design (similar to its daddy, the CBX 500). Carriers love midplanes because they can perform hardware upgrades without interrupting service (assuming the rest of the hardware, operating system, and protocols support this). On a backplane design, you have to deal with unplugging all the cables, then plugging them back into the right ports. Backplane designs are for enterprises, not carriers.

Second, the 3500 uses the same codebase as the CBX 500, which also means that services can be provisioned using Lucent's Navis management package. Since carriers want revenue, and revenue means creating services, it's more than helpful to be able to continue to use the service creation tools that all your staff knows and loves. Alcatel SA (NYSE: ALA; Paris: CGEP:PA) has a similar advantage, by the way, with its installed base.

But the 3500's third and biggest advantage is that it carries the Lucent brand. I've said this before, and I'll say it again: Lucent has a large base of loyal carrier customers. These customers love the CBX/GX ATM networks they have installed, and the best present that Lucent could give them is a portfolio of bigger, faster, and cheaper ATM products that all work with Navis. I still think that Lucent customers are going to have a hard time accepting the core boxes from Juniper Networks Inc. (Nasdaq: JNPR) (not because they're bad, it's just that they're not ATM), but the CBX 3500 is manna from heaven.

It's irrelevant if the competition dismisses the CBX 3500 as "too little, too late," because, while they might be justified in saying that it's too little, it's certainly not too late. Lucent customers have hung on over the past couple years, desperately hoping for follow-on ATM products. Lucent has now thrown them some hope, just as the demand for next-generation services is picking up again.

Of course, all these positives are predicated on the assumption that Lucent will in fact start sending the CBX 3500 out the door "sometime this summer." If Lucent does deliver, it could mean a very happy second half of 2004 for both its loyal customers and its sales reps.

— Geoff Bennett, Chief Technologist, Heavy Reading

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