Optical/IP Networks

Lucent Converges, Jobs to Go

Reacting to the industry's hot convergence trend, Lucent Technologies Inc. (NYSE: LU) is combining its fixed and wireless business units under one roof, with former Mobility Solutions president Cindy Christy at the helm of the new Network Solutions Group (see Lucent Converges Business Units).

The move will result in "improvements to our cost and expense structure by integrating resources and simplifying the business," stated the company's press release, referring obliquely to upcoming job losses.

News of the rationalization and Lucent's second-quarter profits, which exceeded analyst expectations, sent the vendor's share price up by 13 cents, more than 5 percent, to $2.49 (see Lucent Posts Q2 Profit ).

Bringing the two units together will "obviously result in some elimination of duplication," says a spokesman, "but it's too early to be able to put a number on it. The businesses have already been working closely together, so some of that duplication [and elimination] of roles may have already occurred."

Lucent has already cut 800 jobs since the beginning of its financial year last October, mostly from the Integrated Network Solutions (INS) wireline business, and now has a headcount of 31,000 (see Notes From Naperville and Lucent Offshoring Wave Hits Hard). Revenues from fixed-line systems have been shrinking, but the company's management believes the business is stabilizing.

One person from INS who will keep her job is Janet Davidson, the former head of INS. She is now head of Corporate Strategy and Business Development, a role that also includes responsibility for the company's intellectual property portfolio and its OSS business.

Lucent also announced that Yurie Systems founder and Lucent veteran Jeong Kim will rejoin Lucent as president of Bell Labs. Bill O'Shea is retiring from that post after a 33-year career.

The move to replace O'Shea with Kim is an interesting one, representing perhaps yet another attempt by Lucent to inject some entrepreneurial spirit into the R&D division (see Lucent Tries On That Startup Look). Kim was shuffled among several optical posts during his previous tenure at Lucent, before most of those divisions were downsized. He does have startup experience and may look to capitalize on some of Bell Labs' intellectual property (see Lucent Shakes Up Optical Group).

But much of the reorganization is about Lucent's increasing focus on wireless networks, and the integration of the wireless and wireline infrastructure.

In a prepared statement, Lucent CEO Pat Russo said: "In an increasingly dynamic industry this is a logical next step. As I spend time with customers, it is clear that creating new and valuable end-user broadband services is top of mind. Lucent has been focused on the vision, the architectures, the portfolio and the solutions across our businesses that enable rapid delivery of these new services."

Siemens AG (NYSE: SI; Frankfurt: SIE) made similar organizational moves last year, combining its wireline and wireless units to create the Siemens Communications Group (see Siemens Converges in Venice).

Lucent is keen on the whole convergence issue and is angling to promote itself as an IP Multimedia Subsystem (IMS)-capable vendor that can help integrate the two networks. (See LR Explains IMS, Lucent Integrates Bell Labs IMS Tech, Radvision Adds Video to Lucent IMS , Lucent Integrates IMS Tech, and Eurobites: CeBIT Schnippets.)

On the earnings conference call today, CEO Russo said the company is currently engaged in 39 IMS system trials with 11 customers. She added that while sales of traditional fixed-line systems such as circuit switches and mature optical products are declining, there are growth opportunities in IMS-related areas such as VOIP, where Russo cited the acquisition of softswitch vendor Telica (see Telica: Lucent's Good Buy).

Elsewhere in the fixed-line sector, Russo believes Lucent can win business in broadband access, where the company has just announced further contract wins, and with its metro optical products as carriers add capacity to cope with their additional broadband subscribers.

But "the greatest near-term opportunity is in wireless. Three-G is ramping up, especially in the U.S.," stated the CEO, adding that the company, which is the market leader in the CDMA infrastructure market, had just recorded its best mobile system revenues since 2002. Lucent sees great opportunities as CDMA operators upgrade to the high-speed EV-DO access infrastructure, especially in Latin America and China.

Lucent CFO Frank D'Amelio said the company recorded EV-DO revenues during the second quarter "primarily from two customers," believed to be Sprint Wireless (NYSE: PCS) and Verizon Wireless (see Verizon Talks Cellular VOIP and Sprint Invests in EV-DO).

— Ray Le Maistre, International News Editor, Light Reading

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