October 30, 2002
Lucent Technologies Inc. (NYSE: LU) has stopped development on the TMX 880, the high-end ATM switch that was meant to help the company meet hoped-for demand for multiservice, MPLS-based products.
Lucent says on Friday it notified an unspecified number of employees, mostly at its data networking division in Westford, Mass., that they will be laid off. Another industry source put the layoff figure at about 180 people.
The news follows word that Cisco Systems Inc. (Nasdaq: CSCO) and Sycamore Networks Inc. (Nasdaq: SCMR) are homing in on other Lucent ATM assets, also based in Westford (see Cisco, Sycamore Circling Lucent's ATM). It also puts fresh life into ongoing talk that Lucent has stepped-up its house-cleaning to purge other product lines, including the services router Lucent bought with its purchase of SpringTide (see Springtide Ebbing Away?).
The move raises questions about Lucent's future strategy, questions that last week's update on product rationalization by CEO Patricia Russo failed to clarify (see Lucent Clarifies Product Strategy). At least one source, who asked not to be named, thinks Lucent's stripping down for the ultimate garage sale. Others have speculated that it is moving to an exclusive services model.
Let's take those one at a time, TMX first: Despite discontinuing the TMX 880, which had no announced customers, Lucent insists it's still in the legacy-to-packet migration hunt. "We will continue to invest in MPLS and multiservice networks," says spokesman Mike Alva.
Specifically, he says Lucent plans to release a "next-generation edge product," as yet unannounced.
Will the TMX 880 be sold as part of the other ATM gear that's supposedly making the rounds at Cisco and Sycamore? Lucent won't comment on that, calling it speculation. But Alva says the company will look into partnerships of all kinds wherever it sees a clear market opportunity.
What about SpringTide? No comment from Lucent there. But at least one source says the service router that comprised the key SpringTide product is likely to be discontinued in its present form.
"The original SpringTide product actually competed with other products from the company. Its functionality will be included in the new multiservice equipment," says Frank Dzubeck, president of Communications Network Architects.
Analysts don't think Lucent's aiming to end up productless. According to Dzubeck, Lucent's likely to use the money from the sale of its ATM gear to help pay its debt. But it won't give up its focus on products.
Analyst Stephen Levy of Lehman Brothers concurs. "We've said this restructuring will be defined by cutting products, that it will be very different from previous restructuring," he notes. Before, Lucent was cutting off skin and fat; now it's hacking off limbs, he says -- amputations that will ensure its ultimate survival.
As to dissolving its products one by one: nonsense, Levy says. "To me, the core of the company is in its pure CDMA products, services, and voice switching. I don't see those going." Everything else, though, may be open to question.
— Mary Jander, Senior Editor, Light Reading
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