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Optical/IP

Lucent Cools Heels on Price Hike

Lucent Technologies Inc. (NYSE: LU) appears to have backed down, for the moment at least, on raising prices on a significant chunk of its services.

Sources say Lucent warned carrier customers about a month ago that it planned to nearly double the cost of maintenance services on its high-end Class 5 voice circuit switches. But an outcry from Verizon Communications Inc. (NYSE: VZ) and other significant customers seems to have forced the vendor to reconsider.

"They talked about it, but they seem to want to protect their customer base," says Susan Eustis, president of WinterGreen Research Inc., a telecom consultancy. "Customers are shaky already. Lucent doesn't want to do anything to lose the relationships."

Nearly every carrier in the U.S. uses these high-end Class 5 switches in their networks, either from Lucent or a competitor such as Nortel Networks Corp. (NYSE/Toronto: NT).

Carriers invest heavily every year to keep this gear upgraded with the latest functionality (multimedia, for instance). It's not unusual, for example, to have a team of people working on voice switch maintenance. (Lucent says maintenance teams vary according to the number of lines in a switch, which ranges anywhere from 50 to 50,000.)

At press time, Lucent wouldn't comment on the alleged maintenance pricing situation, and Verizon hadn't returned calls. But sources say the news that Lucent could have threatened its customer relationships by raising rates on its Class 5 switch services is interesting for several reasons.

First off, it indicates that carriers may see the end in sight for their investment in circuit-switched voice equipment. While the jury's still out on the progress of alternatives, such as packetized voice over IP (see Where Is VOIP?), many industry pundits insist it's only a matter of time before carriers start pulling the plug on circuit-switched gear.

"[Class 5 switching] is an area that's dying," says Frank Dzubeck, president of Communications Network Architects (no Web site). "And replacements for these switches won't be more Class 5 voice switches. They're living at the edge of legacy." RBOCs and other incumbents are looking at voice over IP seriously, he says, and planning migration strategies. Lucent has its own products to offer in this regard (see Lucent Intros Universal Gateway).

So why would Lucent propose an increase in the first place? Here, sources are divided. "It's a good sign," says Dzubeck. It shows Lucent was confident of its ability to get new business -- for its packet-based products -- without using maintenance as a selling point, he suggests. And that, he says, is a sign of recovery.

But Eustis isn't sure. "From a marketing perspective, it's not a good move," she says. Rather than expressing confidence on Lucent's part, she says, the proposal to raise prices told customers Lucent was so desperate to keep them invested in what it does best -- circuit switching -- that it was willing to risk their wrath to prevent them from moving easily to alternative gear.

Without Lucent's confirmation, or input from specific carriers involved, it's tough to speculate on Lucent's motives for the rumored price increase proposal. But one thing is clear: Any attempts to squeeze life out of voice gear at this point are bound to meet resistance that wasn't there just a few months back. And as that resistance becomes an industry talking point, it's certain to clarify the need to move into voice over IP -- or the reason not to.

— Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com
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lightpimp 12/4/2012 | 10:14:35 PM
re: Lucent Cools Heels on Price Hike "[Class 5 switching] is an area that's dying...

Until VoIP is able to withstand 99.999% reliability and uptime, these hummers are going to be status quo. Softswitches and VoIP are still very far from being a "carrier-class" solution. Most products lack the architecture to make the systems reliable enough for an RBOC/ILEC to deploy. Sorry to be the bearer of bad news :(
willywilson 12/4/2012 | 10:14:33 PM
re: Lucent Cools Heels on Price Hike Until VoIP is able to withstand 99.999% reliability and uptime, these hummers are going to be status quo. Softswitches and VoIP are still very far from being a "carrier-class" solution. Most products lack the architecture to make the systems reliable enough for an RBOC/ILEC to deploy.

-------------

Not only that, but the "problem" of "exhaust" has been vastly misrepresented by VCs and executives of startups, just as these groups misrepresent so many other things.
BobbyMax 12/4/2012 | 10:14:32 PM
re: Lucent Cools Heels on Price Hike To raise maintenance fee at this time was very imprudent on the part of Lucent.

There is no substitute for #5ESS switches. There has been a lot of attempt on the part of start-ups to replace #5ESS with Softswitch.

The features of Software switches is inadequate and its realibility is questionable.

There were about 20 Softswitch companies. A lot have disappeared but a few still remain counting their last days. As soon as the VC money is gone Softswitch, so will these serial enterpreauners.

It is a shame that a company of the stature of Lucent has to go through hard times.

Lucent committed a lot of mistakes in buying Octel Communications, Ascend Communications, and Springtide Networks. It presented enormous difficulties as the products from these companies were no good. To make the matters worst for Lucent, a lot of employees from the acquired got the same job they held at the acquired company. In many instances the guys from acquired companies did not have the necessary education and expertise to fit into the Lucent work environment.

I do not know Lucent was unable to evaluate these shaky companies ( Ascend, Octel, Springtide, Yurie Network, Chromatis, Nexabit). All the companies robbed Lucent of its wealth.

Lucent has the capability to make any equipment in ay short period of time. The Lucent management is responsible for its current sad situation.
BobbyMax 12/4/2012 | 10:14:32 PM
re: Lucent Cools Heels on Price Hike To raise mantenance fee at this time was very imprudent on the part of Lucent.

There is no substitute for #5ESS switches. There has been a lot of attempt on the part of start-ups to replace #5ESS with Softswitch.

The features of Software switches is inadequate and its realibility is questionable.

There were about 20 Softswitch companies. A lot have disappeared but a few still remain counting their last days. As soon as the VC money is gone Softswitch, so will these serial enterpreauners.

It is a shame that a company of the stature of Lucent has to go through hard times.

Lucent committed a lot of mistakes in buying Octel Communications, Ascend Communications, and Springtide Networks. It presented enormous difficulties as the products from these companies were no good. To make the matters worst for Lucent, a lot of employees from the acquired got the same job they held at the acquired company. In many instances the guys from acquired companies did not have the necessary education and expertise to fit into the Lucent work environment.

I do not know Lucent was unable to evaluate these shaky companies ( Ascend, Octel, Springtide, Yurie Network, Chromatis, Nexabit). All the companies robbed Lucent of its wealth.

Lucent has the capability to make any equipment in ay short period of time. The Lucent management is responsible for its current sad situation.
been_there 12/4/2012 | 10:14:29 PM
re: Lucent Cools Heels on Price Hike
I'm not sure what dream world you are living in.

Did Lucent make mistakes with some of their acquisitions? Of course, they did. But their biggest mistake was their inability to make a decision about anything. In the rare cases where a decision was made, it was usually misguided and politically motivated. This frustrated many employees from the acquired company and ultimately drove them away.

I find your characterization of the caliber of the employees at the acquired companies laughable. As someone who lived through the Cascade->Lucent transformation, let me tell you what I saw.

At Cascade and Ascend, I saw many dedicated employees who were willing to do whatever it took to make the company successful. These were the people who were driven away.

After Lucent came in the whole culture of the company changed. As replacements were hired, it wasn't long before the typical employee became a "paycheck-collector" who was unwilling to work outside the bounds of 9-to-5. It doesn't take much education or expertise to fit that job description.
fiberglut 12/4/2012 | 10:14:29 PM
re: Lucent Cools Heels on Price Hike Maybe it was the case that the "Dedicated" Ascend folks left as soon as they were eligible to cash out their options

I have worked with many Lucent employees who have put in long hours and weekend duty to meet deadlines. The "Pay-check Collectors" were the exception and not the rule

Lucent, as well as Nortel, Cisco, and otherlarge companies have lost talented employees for a number of reasons. The downturn in the Telecomm industry has not helped. In today's market revenue drives headcount, and as such sometimes good people are forced out.

In many cases I may not agree with management decisions, but to classify Lucent employees as 9-5 workers is unfair.
WolfLarsen 12/4/2012 | 10:14:28 PM
re: Lucent Cools Heels on Price Hike Depending on who is talking, either:

The startups aquired by Lucent had brilliant people and products who's work was destroyed by Lucent 9-5'ers and bad managment.

or

The startups where shaky, hollow shells with employees that stoped working the day they where aquired and just coasted until their options vested.

Doesn't anyone realize this is a polarized debate?

Novel Idea: The people in the startups and in Lucent were, on average, of the same quality. Complex market changes, culture clashes, and judgement errors on both sides (aquisitions are deals remember) where the cause of failures.

There is no blame.
let-there-be-light 12/4/2012 | 10:14:28 PM
re: Lucent Cools Heels on Price Hike Wolf said:

....Novel Idea: The people in the startups and in Lucent were, on average, of the same quality. Complex market changes, culture clashes, and judgement errors on both sides (aquisitions are deals remember) where the cause of failures.

There is no blame.....


Agree, but perhaps with one exception: management.
In spite of all the polarized debates we have had, everyone (even Bobby Max!) agrees:

LUCENT MANAGEMENT SUCKS!!
fiberglut 12/4/2012 | 10:14:27 PM
re: Lucent Cools Heels on Price Hike If Lucent's top Management sucks why did we pay them large retention bonuses to stay? (ugh)

If we get into a discussion of the problems with Lucent management this message thread may never end.
consultant13 12/4/2012 | 10:14:17 PM
re: Lucent Cools Heels on Price Hike My congratulations to WolfLarsen
As someone who has seens both sides of these M&A equations - it's good to see a balanced view instead of polarizing rhetoric.

Sometimes these pro and con conversations remind me of the story of the blind men trying to describe an elephant. Each could only describe that portion they could lay their hands on!

Without knowing the whole picture, most guesses are just that...guesses.

The real issue for discussion is maximizing the value to Lucent and to its' Customers of the existing equipment. That's a fine balance to achieve in the best of times. The rest of comments come off as sour grapes.
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