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Bosco To Go?

Light Reading
News Analysis
Light Reading
7/27/2000

The optical networking division of Lucent Technologies Inc. (NYSE: LU) is reportedly the target of an executive housecleaning in the wake of the vendor's lackluster earnings report last week (see Lucent Reports Q3, Confirms Spin-Off). But experts question whether the move will turn around the division's disappointing performance.

Lucent refuses to comment on a story run by Reuters news service late last night, which said that Harry L. Bosco, the current group president of Lucent's optical networking group, will leave his job for failing to "meet objectives" for the division. The story cited Lucent's own admission that it has failed to deliver the right products to its customers on time and in the volume they require.

Bosco is a longstanding member of the optical networking executive team, although he only took the post of group president in December 1999. Prior to that, he'd served as division COO, and Gerald J. Butters held the top post. Butters left in December to become senior VP in Lucent's Service Provider Networks Group, which is headed by Pat Russo.

The news that Bosco may get dismissed or repositioned within Lucent met with mixed reviews from analysts. "I'm surprised. His competitors seem to think highly of him as a tough competitor," says Scott Clavenna, principal analyst at Pioneer Consulting. Others agree. "It's odd timing. They and their suppliers tell us that they are just gaining traction in OC-192," says Max Schuetz, optical networking analyst at Thomas Weisel Partners. "But you can't tell. Lucent is such an opaque organization. It's very hard to figure out even from the inside what's going on in that company."

Others think that shuffling execs may not solve underlying problems. "To keep investors happy, they may want the appearance of doing something, even though the damage is done," says Jim Lawrence, program director at Stratecast Partners, a consultancy.

Others agree that Lucent's problems are much deeper than can be fixed by the excision of Bosco. "If he winds up being the only one they get rid of, he'll just be the fall guy," said an industry source who requested anonymity. "They should actually remove the top three layers of management."

Lucent's problems are well known and well documented -- including a "brain drain" of talent to other companies and poor market timing, particularly when it comes to optical networking (See Lucent Technologies Inc. (NYSE: LU)).

Lawrence, for instance, says Lucent took longer than it should have rebuilding its Sonet line, while competitors it had underestimated, such as Sycamore Networks Inc., were gaining ground in core optical technologies like switching and routing. "They were complacent, figuring the market wouldn't be for real until Lucent got there," says Lawrence. They subsequently raced to fill gaps in their product lines with ill-considered alliances and acquisitions, he maintains.

Lucent won't comment on possible successors to Bosco. There are quite a few possibilities, including Rod C. Alferness, current division CTO, as well as numerous others from the many companies Lucent works with or has acquired. One source, who asked not to be identified, said he thinks a good choice may be Jeong Kim, the former CEO of Yurie Systems Inc., an ATM access equipment maker Lucent acquired in 1998. Kim reportedly has been active in the optical networking division, working closely as an advisor to Bosco.

-- by Mary Jander, senior editor, Light Reading http://www.lightreading.com

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