Lucent Ditches 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
http://www.lightreading.com
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.