Lucent Pushing Services

HANOVER, Germany -– CeBIT 2005 -- Lucent Technologies Inc. (NYSE: LU) CEO Pat Russo strode into the CeBIT 2005 annual show here in Germany today with her now familiar messages: Lucent has won a load of more business in Europe, and the company's focus on network infrastructure and delivering professional services to carriers is paying off (see Lucent Touts European Deals).

The firm's 14 new European deals, expected to deliver more than $100 million in revenues in the coming year and more than $200 million over their lifetimes, include new contracts with Deutsche Telekom AG (NYSE: DT), Colt Telecom Group plc (Nasdaq: COLT; London: CTM.L), Global Crossing Holdings Ltd. (Nasdaq: GLBC), and Telecom Italia SpA (NYSE: TI).

So far, so very much like last year's CeBIT (see Lucent Parties at CeBIT).

But hold on to your bratwurst! Away from the vendor's press conference, John Meyer, president of Lucent's Worldwide Services division, outlined a more radical shift in Lucent's services strategy (see Lucent Names Services President).

He says the vendor is now delivering VOIP services to cable operators, including Time Warner Cable and "a major U.S. service provider," and those services are being branded and resold to enterprise and residential customers. (Time Warner hadn't responded to requests for confirmation as this article was published.)

In essence, then, Lucent is moving into wholesale services provisioning, though it has no plans to deliver services directly to end users and is keen to stress that it is not setting itself up as a competitor to its carrier customers.

"We're providing hosted VOIP services to service providers that they can then sell on to their customers. This allows them to launch a service very quickly," says Meyer. "They can then set up their own VOIP systems, or, hopefully, stick with us as their wholesale supplier once they recognize the benefits."

The key technology behind this strategy comes from two of Lucent's key partners: BroadSoft Inc., which provides its hosted IP applications, or Centrex, platform; and Juniper Networks Inc. (Nasdaq: JNPR), which provides the necessary core routers. "The enterprise customers tend to have their own routers," he notes.

Lucent also delivers another slightly different VOIP services model, where it builds the VOIP capabilities at the service provider's premises and then moves in a team to deliver and manage the services until the service provider decides to take the reins. This is what Lucent is doing with Italian IT services provider Enterprise Digital Architects (see Lucent Lands Italian VOIP Deal).

Meyer says VOIP services management is just one of the growing outsourcing opportunities being taken up by his group, which, with 11,000 staff, now accounts for about one third of Lucent's total headcount and almost $2 billion in annual revenues from a total $9 billion (see LU Finds New Revenue).

He says Lucent is already running Telecom New Zealand Ltd.'s CDMA mobile network, and that a new wireless CDMA contract in the Cayman Islands also includes running the network on a day-to-day basis (see Lucent Wins Services Deal).

Lucent is also having a great deal of success with its wireless network optimization services in Europe, adds Meyer, though he can't name any carriers for that service. However, a European wireless industry source, who requested anonymity, says Lucent has worked with pan-European mobile operators T-Mobile International AG, Orange SA (London/Paris: OGE), and mmO2 plc in this area.

But while Meyer boasts of services success in Europe, how does he feel about having lost out to Alcatel (NYSE: ALA; Paris: CGEP:PA) for the prime integration and services deal at SBC Communications Inc. (NYSE: SBC), one of Lucent's long-time major infrastructure customers? (See Mais Alors! Alcatel Bags $1.7B SBC Deal .)

"That was a problem for us. We had taken the whole IPTV idea to SBC months before," says Meyer, who says it was made all the worse because "we have an IP DSLAM, and that's something Alcatel hasn't delivered yet," though Alcatel says its 7330 product is completed and shipping (see Alcatel Cancels New Litespan DLC).

Meyer's quick to add that Lucent has landed IPTV gigs with BCE Inc. (NYSE/Toronto: BCE) (better known as Bell Canada), Spain's Telefònica SA, and Brasil Telecom SA, and boasts a number of key partners in this growing sector, including IPTV middleware suppliers Microsoft Corp. (Nasdaq: MSFT) and Myrio Corp. (see Telefónica Uses Lucent/Riverstone Combo, Lucent Scores With Telefónica, Bell Canada Deploys Lucent Stinger, and Lucent Wins at Brasil Telecom).

Despite the SBC setback, Meyer is naturally bullish about his services group's prospects. "This group will end becoming Lucent. Our differentiator in the future will be software and services. Hardware is becoming commoditized. I'm not saying we won't deliver Lucent hardware to our customers, but in 10 years' time we'll be a solutions company."

— Ray Le Maistre, International News Editor, Light Reading

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