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September 12, 2000
Lucent Technologies Inc. (NYSE: LU) may be losing its lead in the ATM core switch market, a segment it's dominated up to now. It's a bitter irony, considering how Lucent's held stubbornly to the ATM card, despite questions about the wisdom of its strategy.
According to recent research from Infonetics Research Inc., Lucent's still leading the $268 million market for core ATM switches, but it's losing ground: Its share shrunk 18 percent over the last quarter. Rival Nortel Networks Corp. (NYSE/TSE: NT), in contrast, gained 11 percent market share over the same period.
The trend could prove distressing for Lucent, which has thrown its weight behind ATM, despite signs that the market may be shifting in other directions (see "Rich McGinn," The Top Ten Movers and Shakers in Optical Networking).
According to the Infonetics report, "Service Provider Core and Edge Hardware," growth in core ATM switches is starting to shrink, as core routers from the likes of Juniper Networks Inc. (Nasdaq: JNPR) are increasingly used to create an optical backbone. During the last quarter, ATM core switch sales grew just 18 percent, compared with 38 percent during the last quarter of 1999. In contrast, core router sales grew 41 percent this quarter, as opposed to 36 percent the previous. Infonetics says new routers will take even more of a chunk out of the overall ATM core switch pie later this year.
Misreading market shifts is just part of Lucent's problem. The vendor's ongoing organizational woes also haven't helped it make points with customers.
"Lucent seems to be a state of disarray," says Infonetics analyst and report author Kevin Mitchell. He blames the most recent, "terrible" quarter in part on an apparent lack of focus at Lucent, which manifests itself in an inability to market products effectively.
"ATM core switches aren't all that different from one another," he says. Lucent's GX 550, he notes, is closely comparable to Nortel's Passport 15000, both of which factor into the figures. If Lucent's losing market share, he says, it's probably because it's not offering its switches in multiproduct packages that make marketing sense. "ATM switches are never sold alone," says Mitchell. "They're always part of an overall solution."
Lucent apparently hit another snag when a cadre of ATM experts working on its next-generation ATM switch, code-named "Oz," reportedly jumped ship to found their own company earlier this year: Equipe Communications Corp.. While Equipe's crew denies any use of Lucent's technology, the team's absconding seems to have delayed Lucent's own ATM development. (See Équipe Scores Another $51 Million ).
For its part, Lucent denies any loss of market share. "It is normalfor market share numbers to fluctuate on a quarterly basis. The numbers from quarter to quarter can be affected by a range of factors, such as shipping cycles and project calendars," says Lucent spokesperson Lynne Dacy. "You really need to look at the numbers from year to year." And those figures, she says, show Lucent on "an increasing trend overall, including year-to-date growth in 2000."
Further, Dacy says, there are differences among market research firms' results -- and in how those results are reached. She says that according to Cahners In-Stat Group, Lucent's ATM switch market revenue is growing, while Nortel's is shrinking.
-- Mary Jander, senior editor, Light Reading http://www.lightreading.com
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