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Sources: Lucent Talking to Équipe

Finally, there's an acquisition rumor going around that doesn't involve Ciena Corp. (Nasdaq: CIEN).

Lucent Technologies Inc. (NYSE: LU) is in high-level discussions to acquire core multiservice switch startup Équipe Communications Corp., according to two sources close to the companies.

But first, a little history. In 2001, Lucent canned development on its next-generation core packet-switching product, leaving it with a hole in its product portfolio (see Lucent Bags High-End Switch). Now, Lucent's said publicly the new strategy in core switching is to rely on a relationship with Juniper Networks Inc. (Nasdaq: JNPR) to deliver a converged, multiservice network using Juniper's core routers (see China Deals Brighten Lucent's Day).

But selling routers may not be enough, given the legacy Asynchronous Transfer Mode (ATM) switching requirements of most big service providers. Lucent is also working on a multiservice edge switch -- the CBX3500 -- but this may not satisfy the core requirements of the carriers (see Lucent's WaveSmith Killer).

So, Lucent could still find the need for a core switching product with an ATM foundation -- and that describes the Équipe product. And here are some more reasons why this deal could make sense:

  • Équipe's got a big Lucent heritage. In fact, many of its executives and engineers came out of the Lucent division that developed the ATM switching products it acquired when it bought Ascend/Cascade.

  • Verizon Communications Inc. (NYSE: VZ), a big Lucent customer, has cooked up a converged packet switch (CPS) request for proposal, sources say. The RFP describes a switch for a Layer2/3 buildout that supports ATM. The competitors are expected to be a Alcatel SA (NYSE: ALA; Paris: CGEP:PA), Ciena, Équipe, Lucent, and Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA). But Lucent, at least right now, doesn't appear to have the product.

  • Sources say Équipe's down to its last few months of cash and needs to make something happen quick -- which also means Lucent could probably get it cheap. The deal size would likely be under $200 million and probably closer to $100 million in stock, sources say.
Here's how one reliable source described the deal: "It would make it look like the VCs had a liquidity event, while in fact not much money changes hands; and most of the people at Équipe get jobs at Lucent... That's good for both of them."

Well, maybe. Another source, asking to remain unnamed said: "Well, it would be a stupid deal, and that's just why it might happen."

What could be the problem? Well, Équipe has had several of them. It's been known that Équipe's been angling for a while to get a piece of core packet-switching action at Verizon -- but it doesn't appear to have made much headway. Case in point: If Équipe is the right product, why hasn't its partnership with Ciena resulted in a big contract at Verizon? (See Équipe & Ciena: We're Fine.) Ciena, for it's part, says everything's just dandy. (Ah, so there is a Ciena connection here after all).

Équipe's product development has had a rocky history. Sources say it never recovered from having a chip supplier -- said to be PMC-Sierra Inc. (Nasdaq: PMCS) -- cancel the chipset on which the product was orginally built. And its VP of engineering left in early 2003 (see Équipe Loses Engineering VP).

But our happy-go-lucky source downplays all that: "It's not as big a problem as you believe."

Why's that? Well, maybe with Lucent behind the product, it could motivate chip partners and the powers-that-be to help revive the product. And perhaps Lucent could use its political muscle with Verizon to convince them it's the right product. At least that's the logic behind what it would take to make the deal happen.

Of course, Lucent could also just be kicking the tires. It's happened before (see Is Lucent Sounding Out Sonus? ). Lucent officials said they do not comment on acquisition rumors, and Équipe officials had not returned phone calls by press time.

— R. Scott Raynovich, US Editor, Light Reading

Ishmeal 12/5/2012 | 2:18:38 AM
re: Sources: Lucent Talking to Équipe Let's remember that ciena is a shareholder in Equipe and will be privy to the negotiation. Do you think that if Ciena (the company that has currently bid Equipe at VZ) thought that there was a chance that Equipe would get the core biz at VZ they would allow Lucent to pick them off instead of exercising the acquisition option themselves? Hmmm Also what effect would this have on the supposed Lucent/Juniper relationship?
goingoutside 12/5/2012 | 2:18:33 AM
re: Sources: Lucent Talking to Équipe Was that a typo or did I really see 200M for Equipe? Not even Lucent would pay that much for a company with no customers or product. Come on, the LU shareholders have been screwed enough. They're not going to allow two centuries for a dead startup.

Slow news day LR or is this real? Sources said, sources indicated - which sources?
tjs 12/5/2012 | 2:18:32 AM
re: Sources: Lucent Talking to Équipe The rumor floating around VC circles is a infusion of 5 or 10 mill by LU with Zillions of strings attached.

200 million, fabric is dead and the vitesse pacemaker.... well let's just say no one will ever do business with them again.

at 100 million they don't even pay the VC prefs.

ATMRules 12/5/2012 | 2:18:23 AM
re: Sources: Lucent Talking to Équipe I don't know what's better, to be aquired by Lucent or to go out of business on your own:

1. Chromatis
2. Springtide

the list goes on and on, if anyone were to buy this 4 year old startup with no customers/revenue it would probably be Lucent. The Equipe box is so big I can't see any customer deploying more than 20 or so, then what? Most customers ILEC, RBOC mom and pop shops wouldn't need to many of these things....RIP.


ATMRules!!!!
go_to_the_light 12/5/2012 | 2:18:08 AM
re: Sources: Lucent Talking to Équipe
* +ëquipe's got a big Lucent heritage. In fact, many of its executives and engineers came out of the Lucent division that developed the ATM switching products it acquired when it bought Ascend/Cascade.

Lucent heritage indeed. The execs who Lucent tried to sue after taking IP with them? Those execs? The fact that many of Equipe's executives came out of this division is not the sole reason for Lucent (or any company) to look into this aquisition. The executives who would justify this statement started other companies.

As for engineers, they went to Wavesmith.

The best and brightest at Equipe came from Nortel (and other places, including other Lucent divisions). Trying to leverage a "Lucent heritage" these days just comes off weak, both from the company and reporters who buy into it. Do your research LR - talk to people.


But Lucent, at least right now, doesn't appear to have the product.

And buying Equipe's box isn't going to solve this. Isn't that chip you reference in the article the one that would affect ATM?


* Sources say +ëquipe's down to its last few months of cash and needs to make something happen quick -- which also means Lucent could probably get it cheap. The deal size would likely be under $200 million and probably closer to $100 million in stock, sources say.

For what it's worth (apparently not much by those numbers) - at least some of the people will at least get to have a job (until Lucent screws this up as well as others have mentioned). I can't help but notice the irony of people who dumped on Lucent throughout '99-'01 will now be chowing on crow (watch out for West Nile guys) for breakfast?

Fast forward 5 (not 4) years and, in retrospect, many of the people there (and many startups in fact) would have been better off staying at the mother ship or going to SCMR.
goingoutside 12/5/2012 | 2:12:07 AM
re: Sources: Lucent Talking to Équipe did lucent spend that 200M yet? what's the latest word on le francais ay-keep?
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