Lucent Dabbles in IP Services

Lucent announced availability of its new IP Service router, raising questions about its strategy in the edge-router market

July 2, 2002

5 Min Read
Lucent Dabbles in IP Services

Lucent Technologies Inc. (NYSE: LU) announced a new IP services router today, the AccessPoint 1500 (see Lucent Launches IP Service Router). At first glance, the new product looks as though it’s an edge router platform. But upon closer examination, the new product is simply a new version of an existing access router acquired from Xedia in 1999.

While the announcement itself is not earth-shattering news, it does highlight an important hole in Lucent’s product offering. The company, which has one of the largest telecom distribution channels in the industry, doesn’t offer an IP edge router. And for a company that claims to be focusing more and more on IP, this seems like a rather big void (see Taking Routing to the Edge).

According to the latest figures from Infonetics Research Inc., worldwide revenues for service provider edge/aggregation routers totaled $472 million in 1Q02. And even though this figure was down 8 percent from the previous quarter, the edge/aggregation router segment declined less than other areas, such as core IP routing, which declined 24 percent. Further, the firm expects 2002 to be an up year for edge/aggregation routers, totaling $1.9 billion, a 25 percent increase from 2001.

Such activity has prompted a slew of contenders to enter the market (see Edge Routing Gets Service Friendly ). It also helped drive the merger between Juniper Networks Inc. (Nasdaq: JNPR) and Unisphere Networks Inc., which was completed today (see Juniper Acquires Unisphere).

Lucent’s new box, which only supports 700 Mbit/s of throughput, is designed to sit at the customer premises and provide IPSec virtual private network tunneling and encryption, along with quality of service and traffic shaping functions. It does not currently support Multiprotocol Label Switching (MPLS) functionality.

In terms of routing and IP services products, Lucent has two main product families: the SpringTide Service Switch and the TMX MPLS multiservice switch. The SpringTide IP service switch competes with the IPSX switches from CoSine Communications Inc. (Nasdaq: COSN) and the Shasta product from Nortel Networks Corp. (NYSE/Toronto: NT) (see Lucent to Ship IP Services Switch). Lucent hasn’t made much noise about the box in quite some time, leading many in the industry to speculate that the development team has refocused its efforts on preparing this box to sell into the wireless router space.

Refocusing SpringTide may not be such a bad idea. CoSine and Nortel/Shasta haven’t been terribly successful in selling their products. CoSine reported only $7.1 million in revenue for Q102, along with a pro forma loss of $19.9 million. While the concept of managed IP VPNs seems to be gaining momentum, service providers have several choices of what equipment to deploy to offer this service (see VPNs Branch Out ). For example, more and more IP edge routers are adding VPN (virtual private network) functionality to their boxes (see Edge Routing Gets Service Friendly ).

CoSine, Shasta, and SpringTide all offer some routing functionality, but they are not considered full-blown routers and lack the robustness of proven routers, such as those from Cisco Systems Inc. (Nasdaq: CSCO) and Juniper/Unisphere, says Frank Dzubeck, president of Communications Network Architects Inc.

Other than SpringTide, the closest offering Lucent has to an edge router is the TMX MPLS switch, says Kevin Mitchell, an analyst with Infonetics (see Lucent Unveils Core Switch). However, this multiservice switch is focused more on ATM and MPLS, rather than IP edge routing and aggregation, says Mitchell. He also says that Lucent’s void in edge routing could be a problem down the road for the company.

"It depends on what their long-term strategy is. In the long term, if they want to be in the IP/MPLS game, they need to get into edge routing,” he says. “But for the short term, it’s not a big deal to go without it.”

It’s no secret that Lucent has little expertise in IP. Back in 1999, the company acquired Nexabit Networks for its core IP router. But within a year the core IP routing project was cancelled, and the engineers working on that product were gone (see Lucent Faces "Exodus of Nexabit Staff").

Despite a lack of true IP expertise, Lucent still has one important thing going for it: a strong distribution channel. And in a tough market such as this one, it is important to have ties to established carriers. Lucent, with its worldwide reach and its well established distribution channel, could offer strong competition against both Cisco and Juniper/Unisphere, says Dzubeck.

“What differentiated Unisphere from the rest was its relationship with Siemens AG [NYSE: SI; Frankfurt: SIE],” he says. “Lucent has a strong distribution channel, and if they decided to get into this market, they would have to be a significant player.”

But at the end of the day, Lucent doesn’t appear to be moving in that direction. The AccessPoint 1500 is not targeted for edge applications, say Lucent officials.

“This is an access router. It competes with Cisco’s 7100 and 7200 routers,” says Joseph Raccuglia, senior product manager at Lucent. “It is definitely not an edge router.”

— Marguerite Reardon, Senior Editor, Light Reading
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