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Lucent: They're the Tops!

Light Reading
News Analysis
Light Reading
8/22/2001

The optical networking equipment market continues to decline, but Lucent Technologies Inc. (NYSE: LU) has come back as the top optical vendor, according to a recent report from the Dell'Oro Group, a market research company. Dell'Oro's report measured optical equipment revenues from shipments by vendors for the second calendar quarter of 2001.

The entire optical equipment market -- including long-haul DWDM, metropolitan DWDM, and Sonet/SDH gear -- declined in the second quarter to $4 billion from $5.9 billion in the year ago. Lucent led the pack with $847 million in second-quarter optical equipment revenues, giving it 21 percent of the overall market, Dell'Oro says.

The next nearest competitor to Lucent was Nortel Networks Corp. (NYSE/Toronto: NT), which finished the quarter with $635 million in optical equipment revenues, or about 16 percent of the overall market.

Both vendors' equipment revenues were down significantly from their year-ago totals, but Lucent gained market share during the period while Nortel gave up lots of it. Lucent held 15 percent of the market in the year-ago quarter with $892 million in optical equipment revenues. Nortel held 42 percent of the market in the year-ago period with $2.5 billion in optical equipment revenues.

"We're definitely endorsing [Dell'Oro's report] and we're definitely behind the numbers," says Frank Briamonte, a Lucent spokesman. (Now, there's a shocker!) Briamonte says Lucent's market share gain came from its strong overall portfolio of products, its renewed focus on large service providers, and its "nice rebound" in the OC192 market.

"We're very confident about where we're at -- we're still a strong leader in this space," says David Chamberlin, a Nortel spokesman. "We understand that there are going to be fluctuations in buying patterns right now, based on the economic slowdown, and that's reflected in the numbers. This could change based on a single contract."

Off the record, some Wall Street analysts question the report's value because it is basically reporting things that have already been reflected in corporate earnings and sagging stock prices. But there is merit, they say, in its product category breakdowns, which companies such as Lucent don't generally provide.

One breakdown showed that Lucent held 21.8 percent of the Sonet/SDH equipment market in the second quarter, versus Nortel's 14.9 percent share and Cisco Systems Inc.'s (Nasdaq: CSCO) 3.8 percent share. In that category, Nortel's sales slipped 50 percent from the first quarter to the second. Cisco's sales dropped 30 percent for the same period, the Dell'Oro data shows.

Another interesting breakdown shows that networking equipment giant Cisco is quite the laggard in the service provider market. In the optical equipment race, it placed 7th in Sonet gear, 10th in long-haul DWDM gear, and 5th in metro DWDM gear during the second quarter of 2001, according to Dell'Oro's data. That puts Cisco behind Sorrento Networks Corp. (Nasdaq: FIBR) in the metro DWDM market. Sorrento has 6.5 percent, more than twice Cisco's 2.4 percent.

Morgan Stanley Dean Witter & Co. analyst David Jackson says he thinks Nortel's troubles stem from its close ties to emerging carriers, the very ones that are leapfrogging each other to bankruptcy court now that the economy has slowed down.

Nortel, however, says this discrepancy is more a matter of changing spending patterns that fluctuate with different network demands. "Networks that buy optical equipment from Nortel are only now beginning to reach capacity, but those that buy from our competitors are still demanding products in the same quarter," says Chamberlin. "We have networks that are just now beginning to look at their next wave of purchases."

Dell'Oro says it gets its data from equipment vendors and subtracts any returned equipment that counts against a vendor's revenues. It also says it checks its numbers with service providers and SEC filings to ensure accuracy.

- Phil Harvey, Senior Editor, Light Reading
http://www.lightreading.com

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SlapHappy
SlapHappy
12/4/2012 | 7:55:42 PM
re: Lucent: They're the Tops!
It took you long enough to publish this story! Perhaps if this story were about Nortel, or had Juniper done something as big it would have been on a lot sooner. Heres to journalistic integrity!!!
Belzebutt
Belzebutt
12/4/2012 | 7:55:41 PM
re: Lucent: They're the Tops!
Hey LR, where are the susupcions about LU fire sales and slipping margins? Where's your integrity?
>;-)
SlapHappy
SlapHappy
12/4/2012 | 7:55:39 PM
re: Lucent: They're the Tops!
We must forgive Steve Saunders and his staff, they are truly lost without a Lucent to bash.
ownstock
ownstock
12/4/2012 | 7:55:35 PM
re: Lucent: They're the Tops!
When you hit bottom, it is easy to get better...it's either that or die.

Should retitle the story: LU survives...for now.

There is a reason why the court makes you swear:

"The truth, the whole truth, and nothing but the truth..."

While the article as it stands is the truth, that new title would be the "whole" truth.

-Own
ivehadit
ivehadit
12/4/2012 | 7:55:31 PM
re: Lucent: They're the Tops!
i have to say LR put a little effort in it so i'm willing to accept the argument that is why the story was late.

nortel tanked in the last quarter. i don't think the argument that "their networks filled up earlier than ours" is credible.
Milano
Milano
12/4/2012 | 7:55:30 PM
re: Lucent: They're the Tops!
The other missing part of the story is how strong Alcatel is. NT nearly sank to 3rd spot past the French. If Alcatel continues stealing market share at the current rate, they will get the silver medal at the next qtr review.

LU got there by getting wins through price cuts. They are banking on a recovery in 2002. If they are right, they will ride the wave.

M.
LocalYokel
LocalYokel
12/4/2012 | 7:55:28 PM
re: Lucent: They're the Tops!
Ah, I just looked at the chart again and saw the percentages - 60% of the metro market to other vendors not represented in graph. So this is a big boys Nortel vs. Lucent vs. Cisco.
LocalYokel
LocalYokel
12/4/2012 | 7:55:28 PM
re: Lucent: They're the Tops!
Should that bar graph read Q2 2001?

Also, is the metro share that Nortel has a shock to anyone? I didn't think they were as strong there (and whyb no mention of it in the article, given that Metro is where the near-term opportunity is?). Is it because there are some other vendors not shown in the bar chart?

Yoke
ownstock
ownstock
12/4/2012 | 7:55:25 PM
re: Lucent: They're the Tops!
TOP STORY

Lucent Tells Analysts Revenue Outlook
Remains Cloudy, Profitability Still Goal

A WALL STREET JOURNAL ONLINE News Roundup


MURRAY HILL, N.J. -- Lucent Technologies Inc. told analysts Thursday it expects to report a fiscal fourth-quarter loss in line with its previous guidance but again declined to provide a revenue outlook, "due to market uncertainties."


...or survival uncertainties?

Same ol' same ol'

-Own
johnjohn
johnjohn
12/4/2012 | 7:55:25 PM
re: Lucent: They're the Tops!
If I'm Lucent, I'll ride this things for all it's worth.

But one quote in the article put everything in perspective: "One big contract could change the score very quickly."
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