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Optical/IP

Winstar Sues, Lucent Scoffs

Things got ugly between former business partners Lucent Technologies Inc. (NYSE: LU) and Winstar Communicaitons Inc. (Nasdaq: WCII) today, after Winstar, apparently blaming others for its deteriorating business, slapped Lucent with a $10 billion lawsuit for breaching its vendor financing contract (see Bankrupt Winstar Sues Lucent for $10B).

On the same day, Winstar, a service provider, also filed for Chapter 11 bankruptcy protection in an effort to re-organize its business operations.

The lawsuit, filed in U.S. Bankruptcy Court in Delaware, not only seeks damages but asks for an immediate injunction to force Lucent to cough up more than $90 million it alleges Lucent failed to pay on March 30, 2001.

In the legal filing Winstar expressed disappointment with Lucent.

“Lucent represented that it had the expertise, personnel and financial wherewithal to undertake its obligations under the Supply Agreement... Little more than two years into the five-year agreement, Lucent has shown its promises were hollow.”

But Lucent says that Winstar is in the wrong, not them. "This lawsuit is absolutely frivolous,” says Mary Lou Ambrus, a Lucent spokesperson. "It’s without an ounce of merit. We did not breach any of our obligations to Winstar.”

Although no countersuits have been filed, Lucent publicly pointed the finger right back at Winstar, contending that two days ago Winstar failed to fork over a $75 million debt payment it owed to Lucent.

They are the ones that breached their financial convenant,” says Ambrus. “They are the ones in payment default with us. Their contention that Lucent caused them $10 billion in damages is ridiculous and has no basis in the law.”

The strategic deal between Lucent and Winstar was struck back in 1998 and originally called for Lucent to provide equipment and services for up to $2 billion, along with financing to help defray the cost. Initially, the contract allowed Winstar to draw down up to $500 million at any one time. Last year, the companies renegotiated their agreement, permitting Winstar to draw down as much as $1 billion. While Lucent won’t say exactly how much Winstar still owes them, reports have circulated that the amount is around $700 million.

In its release, Winstar insisted the bankruptcy filing would have no impact on day-to-day operations.

-- Marguerite Reardon, Senior Editor, Light Reading http://www.lightreading.com

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flanker 12/4/2012 | 8:33:02 PM
re: Winstar Sues, Lucent Scoffs It's unlikely Delaware courts would find in favor of a debtor. Winstar doesn't have a snowball's chance in hell...

Even if there was no right of offset...


cable_guy 12/4/2012 | 8:33:00 PM
re: Winstar Sues, Lucent Scoffs I've seen the dynamics of this deal up close and Winstar has every right to be upset. Lucent was downright incompetent in building Winstar's optical networks.
dirty splice 12/4/2012 | 8:32:56 PM
re: Winstar Sues, Lucent Scoffs What did Lucent do that was wrong - other than provide crummy equipment?
fatchance 12/4/2012 | 8:32:51 PM
re: Winstar Sues, Lucent Scoffs When the players get too far away from their core business and go in to the banking business you know things are geting flakey. When you give $500M in credit to one customer you're an investor, not just a supplier.
mu-law 12/4/2012 | 8:32:51 PM
re: Winstar Sues, Lucent Scoffs "On the same day, Winstar, a satellite-based service provider"

Shame on you... they were fixed point wireless. There is a world of difference.
flanker 12/4/2012 | 8:32:50 PM
re: Winstar Sues, Lucent Scoffs "On the same day, Winstar, a satellite-based service provider"... "Shame on you... they were fixed point wireless. There is a world of difference."

Yes, and what Lucent equipment was supplied to Winstar, anyway?
flanker 12/4/2012 | 8:32:49 PM
re: Winstar Sues, Lucent Scoffs "On the same day, Winstar, a satellite-based service provider"... "Shame on you... they were fixed point wireless. There is a world of difference."

Yes, and what Lucent equipment was supplied to Winstar, anyway?
redbull 12/4/2012 | 8:32:47 PM
re: Winstar Sues, Lucent Scoffs Give Lucent a break. They try hard.
cable_guy 12/4/2012 | 8:32:41 PM
re: Winstar Sues, Lucent Scoffs Winstar is always billed as a fixed wireless provider, which is true, but just for the last mile. They have a massive national long haul fiber network built with Lucent's Wavestar 400G. And in response to the guy who asked what did Lucent do wrong besides providing crummy equipment? They couldn't get the crummy equipment to work after months and months - costing Winstar revenue and customers.
cfaller 12/4/2012 | 8:32:39 PM
re: Winstar Sues, Lucent Scoffs Winstar was a CLEC with lots of fixed wireless assets, yet they had a national IXC dark fiber network and Lucent DWDM equipment.

A CLEC with expensive IXC assets? No wonder they went bankrupt. Lucent may have been a problem, but they were not THE problem.
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