Lucent Silences SpringTide

Lucent Technologies Inc. (NYSE: LU) confirmed today that it's canceled its SpringTide Service Switch series. "We're discontinuing feature development and ceasing all active marketing," spokesman Steve Loudermilk told Light Reading today.

The news is no surprise. Industry observers had long expected to hear the last of the SpringTide IP service switch, particularly now that the company's aggressively combing its product line with an eye to saleable or ditchable items (see Springtide Ebbing Away? and Lucent Clarifies Product Strategy). Indeed, last week's news that Lucent's stopping support of its TMX 880 multiservice switch served to fuel speculation that the end of the line was in sight for SpringTide (see Lucent Chops TMX 880).

SpringTide was acquired by Lucent for $1.3 billion in 2000, but its wares seemed to founder, and Lucent's been peddling the switch as a wireless router for several months.

It's not clear whether the cancellation will result in layoffs. "We're not commenting on layoffs at this time," the spokesman says. But at least one other source says the news could affect about 150 employees in Lucent's InterNetworking division in Westford, Mass., which was hit by a layoff of about 180 in the wake of the TMX news.

Lucent may be hedging its bets, since it seems the SpringTide technology may be cycled into other products. Loudermilk says Lucent will continue to develop its multiservice line of products using what it learned from SpringTide.

It's unknown just how many engineers from SpringTide might be needed to do that.

At least one analyst thinks Lucent's move is regrettable. "Lucent could be cutting its nose to spite its face," says Ron Westfall, principal analyst at Current Analysis. Broadband aggregation and IP service switching continue to be important market areas, he notes. If Lucent had hung in there, it might have seen a better payoff from the SpringTide series in 2003. Now it's got no equivalent product to meet that need.

Westfall maintains that one reason SpringTide failed to spark sufficient customer interest to keep it going was that Lucent neglected to add some key features to help keep abreast of competitors such as Nortel Networks Corp. (NYSE/Toronto: NT). "Lucent was missing CPE equipment and never fully resolved SpringTide's management software issues," Westfall says. In contrast, Nortel's VPN gear, including its Shasta line, comes with CPE, which helps corporate customers overcome a fear of relying totally on the telecom network for secure links. Further, he notes, one management system is capable of handling Shasta and Nortel's other VPN-oriented products.

— Mary Jander, Senior Editor, Light Reading
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routerboy 12/4/2012 | 9:22:39 PM
re: Lucent Silences SpringTide I remember all these times with great detail. You pretty much hit it on the spot. Of-course,all the stock options to keep us interested, today they are worth nothing!
LightSeeking 12/4/2012 | 9:22:48 PM
re: Lucent Silences SpringTide Happy-Daze,

Quite comprehensive and truthful! What a pity! Yes, it is a downfall. But what can one do about the shortfall this downfall has created? I have a feeling that there is a lot of software talent and expertise out there that will maintain the software part of the industry going. But what about the shortfall created in the hardware side of the telecom business due to the downfall of Lucent and the likes? That is a void that will not be filled very easily.

Happy_Daze 12/4/2012 | 9:22:50 PM
re: Lucent Silences SpringTide
Many people posting on Lightreading try to explain the collapse of Lucent's acquisitions (or Nortel's or Alcatel's - just plug in different names)in some kind of simplistic terms. Examples include:

1)This was all due to greedy startup people versus gullible old-line Bellheads who didn't know what they were acquiring.
2) The startups had flawed technology and products that would never work.
3)There was a clash of exceptionally gifted entreprenuers versus clueless Lucent lifers.
4)Lucent's bureaucratic style stifled innovation and hampered execution.
5)This whole thing was orchestrated by greedy VC's
6)This is all Rich McGinn's fault (Dan Stanzione, Carly Fiorina, Bill O'Shea, Arun Netravali, Pat Russo....)
7)The Lucent BoD was a bunch of non-technical, non-market savvy people who allowed things to get way out of control under their watch.
8)Bell Labs had too much control and torpedoed strong non-Labs efforts
9)The Lucent management team couldn't successfully sail a toy boat in a bathtub
10) The collapse of the bubble era spending is the root cause
11) It was all about the battle between IP packet switching (many of the acquisitions)versus circuit switching(the oldguard's favorite technology)
12)It was all about the collision between IP and ATM that was never internally resolved
13)Lucent was incredibly overstaffed and inefficient in managing employees. This whole collapse is about a company that was inefficiently run. The startups were just victims of this.

Depending on which acquisition and which period of time you consider, any combination of these may be appropriate. And many of these reasons relate to why Lucent as a company has failed - not just why Lucent as an acquirer has failed. If anyone is real interested in this, here are a few more reasons for LU's downfall that get mentioned less frequently:

1) From the day Lucent spun out of ATT, it was doomed. The whole thing was built on a shaky foundation. Completely broken or non-existent operational systems resulted in no ability to track what was really going on. It was a financial train-wreck in the making.

2)The LU management team had egos roughly the size of the known universe. According to them, Lucent was going to crush Nortel, Cisco,et al based on their bold and cunning leadership. They kept inhaling their own hot air.

3) Lucent management believed that Lucent's early success was due to their attention to customers, outstanding product line, speed of innovation, and incredible customer service and support.It was alll neatly packaged in some nonsensical employee program called The GROWS initiative. HA! The explosion of commercial office space and residential real estate - coupled with the huge growth in second and third phone lines created huge demand for junky old PBX's and CO switches from LU (and NT). The explosion of Internet, voice and data traffic - and the rapid buildout of what is now clearly recognized as a glut of capacity made them look superhuman. Few on Wall Street had the wisdom or financial inclination to reveal the truth. Who in their right mind would have shorted LU in 1999?

4) The corporate excesses that we read about daily during the chronicling of Worldcom,Enron,GC,Tyco... were actually invented and refined at Lucent. Fleets of jets and helicopters, lavish executive facilities, private golf courses,"business" trips to the far reaches of the globe,etc.

5) The strong presence of Labor Unions at Lucent shackled their ability to react to what was happening in the largely non-unionized high-tech workforce. In many cases, Lucent couldn't match Cisco, Bay or other companies progressive programs because of real or perceived issues related to the unionized workers.

6)When Lucent was spun out of ATT,it was a two class company. The executive elite had huge compensation packages and perks including top notch stock options and grants. The workerclass primarly had substandard salaries, a reasonable pension plan, pretty good medical benefits - but essentially no equity participation. McGinn always touted "everyone at Lucent is a shareholder - just like Cisco". What he didn't mention was that all the rank and file got was 100 shares each -the so-called Founders Grant. Not exactly competitive with the option programs of the progressive data networking companies and an utter joke compared to any of the myriad of startups being launched during that era.

7) The inequalities were exposed to the LU workers the day the first acquisition was completed. By late 1996, parading into Lucent via acquisitions came rank-and-file engineers and business people who had made more money in just a few years than a typical topnotch Lucent engineer would make in his/her whole career. And as the magnitude of the deals became larger and and larger during the late 90's and 2000 - the inequalities grew more and more visible. Can anyone guess how many acquirees personally realized over $100M when LU acquired them? $10M? $1M? The numbers would boggle your mind. Presumably they were all smart enough to sell?

8)In many (most) cases, the acquired personnel had some form of option acceleration upon change of control - 25%,50%,even 100%.This was standard VC practice during The Bubble days. "The quicker we can get them out of there, the sooner we can fund our next big thing". To offset this problem,the newly acquired employees were given EVEN MORE stock, so they had something to stay for. This just furthered the class division.

9) The Lucent management egomaniacs were very proud of their acquisitions. So they touted them. The acquisitions and acquirees got more attention and recognition -both internally and externally - than the loyal Lucent people who had slaved for years on slow-moving internal projects.

10)When an acquisition was completed,it often resulted in the cancellation of a huge Lucent project. Those people were either reassigned to help make the acquirees product work (talk about a volatile mix)or told to shop for increasingly scarce jobs within Lucent. Ask any of the former Bell Labs Router (BLR a.k.a PacketStar IP Switch) people what they think of Lucent and the acquisitions. More animosity generated.

11) In many cases,the newly acquired startup mangement team was put in charge of a large Lucent team or even a whole division. Some of these people were very experienced managers who understood the complexities of large companies and made good and fair decisions. Others were pinheads who acted like they were still in a little company with no revenue or customers. They made myopic and very poor decisions. Often their actions had just one purpose: maximize the revenues for their product so as to maximize their startup teams' bonus or earnout. Then leave.

12)Most hardworking people who joined Lucent from the real-world probably hated it there. All-employee broadcasts, Diversity training, GROWS initiatives and a daily barrage of non-work related "special events" made one question what the purpose of being an employee there really was? The environment probably appealed greatly to people who didn't really want to work much. You could eat breakfast and lunch in a subsidized cafeteria, shop for a few things in the on-premise stores and daily "street bazaars". Attend a mid-afternoon event describing the cultural connection between Slovenia and the discovery of The Big Bang ...Oops. Time to go home...

13) Lucent made a lot of decisions based on flawed "data" from outside analysts - both market and financial. During the second half of the 90's every market and financial analyst produced studies showing that every new market segment would grow exponentially almost forever. These assumptions helped mold Lucent's business plan which drove hiring, project staffing, acquisition strategy,etc. In retrospect,this was a case of "garbage in, garbage out". I would suspect that not one set of revenue projections were ever achieved to even a 50% level.

14) The ability to perform pooling of interest deals was the worst thing that ever happened to Lucent. The pooling restrictions expired in late 1998. Shortly after that, Lucent announced the Ascend acquisition for "just" $24 Billion. Chump change when you pool. In Lucent's haste to leverage their overinflated equity, they made numerous ill-conceived,careless, and just plain bad acquisitions.

15) Lucent's management team never did understand what made entrepruneurs (and top performers in general) happy and productive.

16) Lucent senior management was either delusional or pathological liars - or both. At one point in late 98, LU's CEO stated on a national TV business program that the Bell Labs Router had taken just 9 months from inception to completion and was one of the three most important programs in the history of Bell Labs. In actuality,the project had been ongoing for a few years, was nowhere near complete, and was subsequently cancelled before it ever saw any commercial deployment.

17) Lucent never figured out exactly what it wanted to be. "Everything to everybody" is probably the best answer. Heck,they were so successful and so smart in the second half of the 90's,why not just go for the whole enchilada?

I think you get the point. The list of what really contributed to Lucent's downfall goes on and on and on. And no single answer suffices.

net_raver 12/4/2012 | 9:23:09 PM
re: Lucent Silences SpringTide I have seen deployed Springtides before Lucent bought the company. I do not know your definition of evolution or revolution. But from the operation point of view it is a big difference, defining and configuring services centralized propagate it to the POP on request. Rather jump to every box and tweak the config files one ofter one. Which other companies did service creation directory enabled at this time?
seeallwan 12/4/2012 | 9:23:17 PM
re: Lucent Silences SpringTide LU "makes-no-cents" had it's eyes wide open with the same arrogant attitude when they aquired all and claim to have invented everything "under the sun" mentality and failed.

Just last week, the legacy SpringTide folks got 3-5 times their salary in bonuses for delivering nothing! They only waited to cancel the product and lay-off until all the bonuses were paid out.

Add insult to injury, the ST GM was put in charge of all the legacy Cascade Data products, laid off all the CSD engineers in favor of keeping his bonus happy ST engineers to further develop the Cascade product lines.

So, TMX R&D spent 60 million a year for nothing and ST R&D spent 39-45 million as well. Not bad for two years wasted on capping the Cascade products, which happen to be the only revenue in Westford.

Mayday Mayday, Westford is finally sinking, please help Cisco, Sycamore, anyone!!!

broadbandboy 12/4/2012 | 9:23:20 PM
re: Lucent Silences SpringTide Its about time. Product was going nowhere fast. I hear Shasta is going down, Tahoe in trouble, etc. Whole category is questionable, imho.

lightgrieving 12/4/2012 | 9:23:32 PM
re: Lucent Silences SpringTide Lucent has a lot of company when it comes to investing in worthless startups, I'm not sure its fair to say they had their eyes closed, when the whole M&A industry was blinded during the bubble bath.
BobbyMax 12/4/2012 | 9:23:35 PM
re: Lucent Silences SpringTide Lucent had its eyes closed when it acquired SpringTide and paid about $1.4 Billion. It should be mentioned that Spring Tide had merely invested about $39 million. The system was not working and nothing revolutionary or evolutionary. But Lucent for reasons unknown to most experts acquired SpringTide.

The only thing that people who participated in the evaluation of the product and the people who approved the acquisition should be dismissed. If possible, a law suite be filed against the the former CEO and President of SpringTide for deceiving Lucent.
captain_obvious 12/4/2012 | 9:23:37 PM
re: Lucent Silences SpringTide ( insert sarcasm here )

1) They should hire back some more of there washed up execs that still believe they are the "phone company".

2) Maybe they can cancel the full color Lucent magazine or the Lucent Satelite TV Network.

3) Did McGinn ever pay back his 12 million dollar loan he got when he was fired? I wish I was a CEO that got a bonus for failure. What school do you go to for that?
net_kick_puppy 12/4/2012 | 9:23:38 PM
re: Lucent Silences SpringTide *laugh* Everyone knows the answer to that:

The acquisition of the golf course (They made a nice profit when they sold it).
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