Lucent Cuts Target INS
Several sources close to Lucent have told Light Reading that there was a substantial layoff in INS last week. The cuts may have included hundreds of people, they say.
INS is the division of Lucent focused on carrier wireline networking. Despite a rebound in Lucent's corporate profits, most of the gains have come from Lucent's wireless networking division and the INS division has been a long-term money loser. In Lucent's third fiscal quarter, revenues in INS shrank by 3 percent sequentially (see Lucent Continues Down Profit Path).
Lucent won't comment on layoffs other than to say the company expects to continue adding and dropping people "as part of normal business operations."
But employees at INS say last week's layoffs had a particularly bad effect on employee morale, mostly because Lucent has been saying that its restructuring effort is largely over.
"Thursday was an ugly day," recalls one Lucent employee who asked to remain unnamed. "On Tuesday, Pat [Russo] was on MSNBC saying the restructuring was done. Things couldn't be further from the truth. At least Nortel is telling people what they are doing."
The layoffs give further evidence that Lucent is still retreating from some core product areas in telecom networking. Some sources say the INS cuts are particularly deep and will likely leave many products on life support. Some sources also say the cuts may end in the discontinuation of Lucent's CBX 3500 product.
The end of the CBX 3500 would be big news, because it's been billed by Lucent as an important update to its ATM switch family, the CBX 500, which hadn't seen a major new release since 1999.
At Supercomm earlier this year, Lucent unveiled the new CBX 3500 with much fanfare (see Lucent Joins the Edge Crowd and Lucent Launches CBX 3500). Lucent's long-term strategy was to tie the CBX 3500 in with IP routing products from Juniper Networks Inc. (Nasdaq: JNPR) through a co-development agreement.
If Lucent is contemplating an end to the CBX 3500, it could be that it has decided it can accomplish the same goal via the partnership with Juniper. Experts debate whether a Layer 2 multiservice switch and Layer 3 edge router are redundant products, saying that routers could eventually take over all the functions of a multiservice Layer 2 switch.
"There is an issue of redundancy, because Lucent also has Juniper as a partner," says Frank Dzubeck, president of Communications Network Architects. "You have an edge product where your product has an edge product. If your partner is making more of an impact, you have to ask yourself why you are funding a product yourself."
Dzubeck, however, doesn't believe that Lucent would kill the product outright. If they have decided it's redundant, they may simply stop investing in it. "Nobody cuts anything anymore," he says. "They just let it die."
Another source close to Lucent says that is exactly what is happening. He says that recently there were only about 40 engineers left in the CBX division, though it's unclear how many of those were affected by last week's cuts.
Some analysts have speculated that more cuts were coming at Lucent, and, given that its INS division has lacked growth in recent quarterly results, it's the place one would expect the cuts to come (see Report: More Lucent Cuts Ahead? ).
A Lucent spokesman insists the CBX 3500 is not being canceled. "The CBX3500 is generating interest from our customers, and we have shipped to customers," he says. "Anything you're hearing about the switch otherwise is false."
Lucent said recently that it is largely done with its corporate restructuring program, but it continues to reduce headcount. As of the end of August, Lucent's headcount stood at about 32,300. Lucent had 35,000 employees at the beginning of the year.
— R. Scott Raynovich, US Editor, and Craig Matsumoto, Senior Editor, Light Reading