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Tales of Lucent: Readers Respond

Light Reading
News Analysis
Light Reading
11/29/2000

Last week, Light Reading published an anonymous letter with one person's take on the purchase by Lucent Technologies Inc. (NYSE: LU) of two optical networking companies, Chromatis Networks and Ignitus Communications (see Lucent, Chromatis & Ignitus: A True Tale? for full story).

In our introduction to that exclusive story, we requested reader feedback -- and got it en masse. The consensus? Most readers said the story was interesting and believable, but took it with a grain of salt. Others had their own tales to tell.

We think much of this feedback is interesting enough to publish in its own right. Here are the highlights. Please note: Light Reading editors attempted to contact the writers and establish their identities. In cases in which the identities were not established, or in cases in which the readers asked not to be identified, we left our sources anonymous. As with the story itself, we offer this feedback strictly for your review, without editorial comment.

Replies to Light Reading's publication of Lucent, Chromatis & Ignitus: A True Tale?:

    Re: Lucent Chromatis & Ignitus musical chairs. I believe every word of it. I went from contractor to Lucent... to Lucent employee over a two-year period. During that time I observed Lucent kill the joint venture [with my original company], and when I transferred to Lucent... I observed that the company was a very large startup living off the revenue from their legacy switch products. At the time they had little or no grasp on their spending, revenue, or number of employees. I predicted that our organization would not survive the year... that the company would start to feel reality when their spending reached a critical point that would not be shrouded by their revenue from their legacy products. Prior to the disbandment of my organization, the first shoe dropped when Lucent was shocked by the sudden number of employees it had. About 25% more than they thought... Certainly management is not one of their strongest areas....L.P. Van Order, PhD, principal consultant, Product Life-Cycle Support Services

    ...............................................................

    I am a current Lucent employee that reads your page on a daily basis. I enjoy reading the industry "news." But I've noticed that I look forward to reading your site for the same reasons that I gravitate to the
    National Enquirer or the Star while I am at the supermarket. The lawsuits, embarrasing revelations, scandals... what ever happened to the technology? I guess... it probably is much easier for you to write about scandals and rumors than about real technology. Your technology section is not robust... but what should I expect from a web-site entitled "light-reading"?

    There should never be sacred cows in technology, but I feel that you are over-publishing Lucent's woes. It is always easier to beat someone up when they've already been beat up. You have every right to publish what you want (God bless America) but you are over-doing it now. Isn't there someone else you can kick around that would spike up your readership? People will eventually tire of Lucent bashing. You could try to create some kind of Optical Lewinsky scandal. Keep after Bobby Johnson or something. Find some dirt on someone else. Enquiring minds want to know.

    PS. Thanks for putting the heat on McGinn, you can now take him (and Lucent) off the Top 10 has-been bin.

    ...............................................................

    As an ex-Lucent employee of Optical Networking Group (ONG) who was hired to work on the... predecessor of Ignitus's ISTN 3500 which was also cancelled, I have to admit that I have not seen so many incompetent, ineffective, charlatan, obsolete, and useless management in one place at the same time.

    ...............................................................

    Folks, Great piece on the happenings at Lucent, Ignitus, and Chromatis! As a former frustrated Lucent employee, I was deep in the Data Express Do-Do and witnessed... no, lived... through several puzzled summer and early fall months. After struggling to see a coherent strategy emerge, I realized that the people in Murray Hill and Herndon were just bumbling idiots, waiting for their options to vest, with little interest in building long-term shareholder value through sound business or technical decisions. I ejected before the band finished playing on deck.

    Keep up the good work! ...
    Chris Janson (company name withheld)

    ...............................................................

    As for... [the Ignitus purchase being] the source of yesterday's $125 million, the one thing Lucent pretty much said is that it's a revenue recognition issue. So I doubt it's this thing in disguise.

    ...............................................................

    [This is] definitely from a disgruntled Ignitus employee. Word is the due diligence process was a contradiction in terms. Lucent engineers could only test Ignitus boards (because an entire system wasn't ready by that date). The [software] was minimally baked at best. The "spin-in" was done to make Harry's idea look successful. I'd take all that info with a grain of salt, from a salty employee.

    ...............................................................

    I certainly hope that this is not an indication of future business practices at Lucent... [It] seems clear now as to the reasons the Lucent stock prices have taken such a beating... Are those executives tasked with examining new business opportunities for Lucent working in separate and opposite venues? Does no one at Lucent understand that the inability to communicate effectively about what other parts of the company are doing has an immediate and often adverse effect on other parts of the company? Did not Lucent management make it clear what their goals were? Does Lucent management even have goals?

    What was the purpose of buying similar technologies in the first place? Was Lucent so arrogant as to think that only one of these companies would actually bear fruit? Come on!

    Would anyone be surprised at an investor lawsuit over this apparent ineptitude? There is likely to be a much bigger fallout over this SNAFU than is apparent right now.

    ...............................................................

    Your recent story on this subject sounds almost too incredible to be true. Unfortunately, due to personally witnessing a similar story some time ago, I find it entirely credible. My particular story follows:

    In late 1998, Lucent acquired JNA Telecommunications, an Australian network equipment manufacturer. JNA had for a long time been a significant supplier to Telstra, and had recently expanded into international markets.

    At the time of the acquisition, JNA was developing a hardened remote Voice/Data access multiplexer specifically targeted at developing markets and competitive service providers in developed markets. The company was in the process of finalizing negotiations on a first order for 30,000-60,000 ports at the time of the acquisition. By the time the deal was finalized a few months later, it had become 90,000 ports.

    The JNA product overlapped to some extent with the capabilities of the Lucent AnyMedia product. Broadly speaking the two products were in a similar stage of development -- AnyMedia was a little ahead, especially in the ADSL area, a little ahead in the process of inter- working tests with switch vendors, and a little behind in symmetrical business data support.

    Interestingly, while I understand Lucent at that time had invested some US$100 million in development into AnyMedia, JNA had only invested about A$15 million, about 10% of the Lucent investment at the prevailing exchange rate.

    However, the two products were targeted quite differently. The AnyMedia product was designed for incumbent telcos in developed markets, while the JNA product was designed for developing markets and small CLECs in developed markets. The view from both Lucent senior management and the JNA team was that both products had significant market potential, so the JNA team continued development of their platform independently, while planning to take advantage of some cooperative work with the AnyMedia team in the longer term.

    By mid 1999, the new product was in the final stages of acceptance testing by the customer and the first round of customer training had been completed. Local contractors had also been engaged to construct suitable concrete slab bases for the roadside cabinets.

    In late July, JNA representatives were summoned to a product rationalization strategy meeting in New Jersey. My understanding from those who attended is that this meeting was a sham. Up until the time they left there was no meaningful discussion on anything approaching a sensible strategic discussion, and no members of the senior management team showed any interest whatsoever in this supposedly important strategic meeting. I have been told it was quite evident to those who attended that a unilateral decision to kill the JNA product had been taken by senior management, although this was categorically denied at the time.

    About a month later, two senior managers from the Lucent Access Products group flew out to Australia, and after a pretence at consultation with local management, announced that the product was being terminated and resources would be redirected to support development of the AnyMedia product. To deal with the previous sale, the Lucent strategy was to go back to the customer and renegotiate the sale, returning the JNA equipment to Australia and shipping AnyMedia to replace it.

    By this stage 60,000 lines of product had been shipped and delivered to the customer ready for installation, and the other 30,000 lines were committed to production in the supply chain. The contractors were almost at the point of starting to construct the first concrete slabs for the full-scale rollout.

    Subsequently, the 60,000 lines of equipment were returned to Australia at Lucent's expense. A substantial part of the remaining 30,000 lines completed the manufacture process simply because it was too late in the process to stop the subcontractors.

    For the next several months the equipment sat in a warehouse in Sydney, because Lucent couldn't make up their mind whether to sell the product design to someone else. For a while they appeared to have completely unrealistic expectations that they could sell the product with caveats that would prevent the purchaser from taking business away from Lucent. Ultimately they apparently decided against this, and I understand the equipment was all sold for scrap.

    After the product was killed, most of the JAN R&D team was reassigned to work on AnyMedia. Other employees in sales and product management who had valuable skills which Lucent could have used found themselves still employed, but with no meaningful work to do.

    Now some 12 months after the decision, most of the best people who worked on the JNA product have left for either Cisco or Australian based companies. I have been told by industry sources that Lucent has lost its preferred supplier status with the customer, and that customer has now issued a new competitive tender for 600,000 lines.

    The parallels between this story and the one you have published are compelling, and I would suggest that the Chromatis & Ignitus story is probably quite true!

    ...............................................................

The following feedback is taken from a telephone conversation with an ex-employee of Ascend Communications, a networking company acquired by Lucent in June 1999 for stock then worth $24 billion:

    "[Lucent's mishandling of its acquisition of Chromatis and Ignitus] is just the tip of the iceberg... Ascend went through a similar experience. [After Lucent scrapped Ascend products and lost Ascend staff] all they had left was the office furniture."
...............................................................

Lucent spokespeople declined to comment on the scurrilous scuttlebutt, saying the firm did not want to prejudice pending litigation. -- Mary Jander, senior editor, Light Reading http://www.lightreading.com

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