Lucent Ditches Chromatis

Lucent Technologies Inc. (NYSE: LU) has confirmed the closure of Chromatis Networks, the wavelength-division multiplexing startup it purchased in May 2000 for $4.5 billion (see Lucent Catches Chromatis).

The closure involves the layoff of about 150 employees, Lucent says. Most of these are R&D folk located at Chromatis's former headquarters in Petah Tikva, Israel, but a handful of engineers also have been let go at Lucent facilities in Herndon, Va. The company hasn't said whether any closure of buildings or offices will accompany the layoffs.

Lucent plans to discontinue its line of Metropolis MSX gear, which came from Chromatis. The company's other DWDM and next-generation Sonet platforms will continue to be sold under the Metropolis brand.

"This is part of our Phase II restructuring effort. We're resetting our priorities and making difficult decisions in order to focus our efforts on our largest service-provider customers," says Lucent spokesman Frank Briamonte.

The world's largest carriers are still buying telecom products despite the slowdown, but they weren't buying the Chromatis products, Briamonte says.

The news has been greeted by investors as yet another step in the right direction for Lucent, which in the past few weeks has managed to rework its credit agreements, launch a successful bond offer, and garner cautiously positive ratings from influential analysts (see Levy's Lucent Call Boosts Stock, Lucent Boosted by Bond Offering, and Lucent Breaks Through on Covenants). As this went to press, Lucent's shares were trading at $7.48, up 0.15 (2.05%).

Today's news is no surprise to anyone familiar with the long, sad saga of the Lucent/Chromatis relationship. Indeed, the deal has become a textbook example of how mergers and acquisitions were misguided and mismanaged under the executive team led by ousted CEO Rich McGinn.

A variety of sources say Lucent's biggest misstep wasn't buying Chromatis, which already had a metro WDM product ready to hand. The trouble arose when Lucent tried to integrate the box with in-house gear -- and with another recently acquired metro box from Ignitus Communications LLC (see Lucent Ignites ATM).

Months later, the integration effort had yielded little more than questions, arguments, and even lawsuits (see Tales of Lucent: Readers Respond and Lucent, Chromatis & Ignitus: A True Tale?). After awhile, Lucent quietly put the brakes on the Ignitus effort and seemed intent on making a go of the Chromatis wares.

But to little avail. Lucent had already lost significant ground in the metro market, and by early 2001 Lucent folded its Metropolitan Optical Networking unit back into the overall Optical Networking division. Bob Barron, the former CEO of Chromatis, left Lucent in April (see Lucent Metro Boss Leaves) and appears to be heading into a new job soon (see LightCross Taps Former Chromatis CEO).

Other Chromatis veterans say they have no regrets. "It is a very unfortunate situation, but the bottom line is that I understand Lucent's decision from a business perspective," says Doug Green, former VP of marketing at Chromatis and presently VP of marketing at Ocular Networks Inc. "Lucent is trying to restructure to be more efficient, and they had in Chromatis a standalone, single product laboratory in Israel."

He says one could argue a lot of reasons why the Chromatis product never took off, including the many Lucent reorganizations that took place during the product's tenure, as well as Chromatis's dependency on multiple technologies: "The market is moving away from 'god boxes' and the Chromatis product certainly depended a lot on the value of integrating DWDM, ATM, and TDM."

Lucent says it's holding onto the intellectual property it acquired with Chromatis and has no plans to sell it at this point.

— Mary Jander, Senior Editor, Light Reading
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dpgreen 12/4/2012 | 7:54:03 PM
re: Lucent Ditches Chromatis Stuartb,

You certianly raise a valid question.

Without arguing religion (i.e. terminology, pun intended) of what is and is not a "god box", the real question is what level of integration is good and what is bad. SONET itself was an integration of stand alone muxes, FOTS, and protection switches. Frame Relay and ATM were succesfully integrated. Those were examples of appropriate integtration.

What I would call bad (a "god box" in my terminology) is a product that either incorporates too many functions and is not good at any particular one, or a box that incorporates functions that cross too many organizational and cultural boundaries within the customer so that it has no clear value proposition to any single buying entity.

Chromatis, along with all of their contemporaries, pitched the integration itself as the main value proposition, which played well witih startup CLECs. They had trouble, however, displacing application specific equipment in one-on-one comparisons. It's like the high school athlete who is all-state at 5 sports, but not good enough to make the pros at any.

If you read Oculars latest announcements (covered in Light Reading), they focus very clearly on cross connect, SONET, and ethernet transport. Ocular makes the case in one on one comparisons with traditional 3/1 DCS equipment: 1/3 the cost, 1/20th the space, 1/10th the power for EQUIVALENT function.

Integration plays a role as it did in SONET, but you have to have a stand alone business case to displace existing technology in specific applications.
litehearted 12/4/2012 | 7:54:01 PM
re: Lucent Ditches Chromatis dpgreen,

You touched on some very important reasons why "god box" manufacturers have not been really successful. If "god boxes" are "developed" to cross the wrong type of domains, they run into political and organizational trouble. I personally was involved in addressing this issue with various customers. Invariably, there was a discussion of who owned what. The transport organization did not want to own a switch fabric and the data organization did not want to own a SONET mux.

In theory, the idea of "god boxes" techincally appears to be a good idea, especially for "greenfield" service providers. In practice, it creates huge obstacle selling hurdles and customer confusion. How many "greenfield" SPs are left that can actually pay for these boxes. The numbers dwindle daily.

stuartb 12/4/2012 | 7:54:01 PM
re: Lucent Ditches Chromatis I agree that God-box is an inherently relative concept -- the fact is that vertical integration is probably the second biggest factor driving technology evolution behind higher processing speeds. God-box is really more of an affliction on those who, in their quest for the holy grail (pun also intended), don't manage to figure out the right balance in as far as the product arhitecture is concerned(HW, SW and silicon).

With all due respect then, I guess I'm simply calling "bluff" on your marketing strategy. It's clear, I hope to most, that you are trying to reposition Ocular as a Tellabs competitor in an attempt to distance yourself from the many NG-SONET Cerent chasers out there. Up until "Oculars latest annoncement" which you spoke of below, Ocular clearly positioned itself as a best-in-breed MSPP, comparing itself directly to Cerent and claiming superiority through improved multiservice/multifunction integration.

Those claims immediately raised the possibility of the "god-box dilemma" afflicting Ocular. Just because you've now chosen to concentrate on one or two particular services and functions from a marketing standpoint doesn't change that fact.

dpgreen 12/4/2012 | 7:53:59 PM
re: Lucent Ditches Chromatis Stuartb,

Your skepticism is healthy, and your points are actually insitefull. Ocular did choose to focus on certain applications to get away from the train wreck in the MSPP market, but it was early in the process by design (look at the backgrounds of the executive team). Marketing messages are intentionally broad in the beginning to introduce the company without telling competitors what you are doing.

You may continue your healthy skepticism until the customer votes are in. That's all that matters after all.
stuartb 12/4/2012 | 7:53:56 PM
re: Lucent Ditches Chromatis Agreed, real customers with real deployments are quite possibly the only thing that can truly eliminate the god-box label. Last time I checked, Ocular is still absent one. Until then, your remark will continue to strike me as awkward.

Regards -Stu
sanddune 12/4/2012 | 7:53:55 PM
re: Lucent Ditches Chromatis
Hopefully folks at Mahi are following
this discussion. They are next in the
queue for a god-box. Which is supposed
to include really every thing in it.
ZAPPED 12/4/2012 | 7:53:54 PM
re: Lucent Ditches Chromatis As far as God Boxes are concerned, nobody has been able to deliver yet. Lot's of promises, but what about sales? I thought the Greenfield market was almost dead at least for the rest of the year.
The big boys have no interest. From what I've seen, nobody has anything the ILEC's are interested in. Santera just got a huge boost in financing, but they said they would have internet offload by July??? Where is it? Tachion tanked from lack of interest and financing. Sonus Networks managed to go public and make money on the deal, and they have internet offload and a good tandem switch (with customers) albeit in a couple of pieces, but I don't see them anywhere near a voice or class 5 switch? And you talk about a God Box? Am I off base here, let me know
lightmaster 12/4/2012 | 7:53:52 PM
re: Lucent Ditches Chromatis From what I hear on the street about Mahi, it's a similar story to the previous thread, i.e. positioned as doing everything, but in early stages very focused somewhere in the optical cross connect space, possibly as a CoreDirector competitor.
lightmaster 12/4/2012 | 7:53:51 PM
re: Lucent Ditches Chromatis Lucent claims to have other products that can fill in the holes left by the Chromatis product. Is anyone here familiar with what they are?
lightmaster 12/4/2012 | 7:53:51 PM
re: Lucent Ditches Chromatis In case nobody has noticed, nobody is buying ANYTHING new right now. That means that we probably won't find out who the winners are (with a few exceptions) until we see where the 2002 capital budget gets spent in Q1.

The big boys are interested still, but in things that save capex, not so much in experimental technology. It takes a while for the equipment market to reset.
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