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Lucent at a Loss Over Reliance?Lucent at a Loss Over Reliance?

Market points finger at Reliance Infocomm for revenue shortfall

July 22, 2003

2 Min Read
Lucent at a Loss Over Reliance?

Reliance Infocomm Ltd. has emerged as the likely suspect responsible for the “unexpected network acceptance delay” in Lucent Technologies Inc.'s (NYSE: LU) profit warning last week (see Lucent Warns: No Profit in '03).

Various independent sources have confirmed to Unstrung the validity of message postings on Light Reading revealing the identity of the operator (see Lucent Punts 2003 Profit Pledge).

Lucent is believed to have failed to receive a certificate of acceptance from Reliance for the CDMA2000 1xRTT network deal struck last October (see Lucent Wins in India).

“It seems that Lucent was unable to meet some agreed upon delivery/deployment criteria,” says Shiv Bakhshi, research manager for wireless network infrastructure at IDC. “The network is a complex affair. Sometimes, it is difficult to get everything right the first time, or on deadline. If there is the smallest incompletion of any kind, the operators often refuse to sign off.”

As a result, Lucent is rumoured to have received only a third of the money due in this $450 million deal, depressing its revenue results this quarter.

Neither party is prepared to validate this claim, although Lucent spokesman Ichiro Kawasaki is keen to play down the notion of any large-scale problems with the project.

“Reliance has launched their service commercially and we are continuing to work with them and deploy equipment,” he tells Unstrung. “They are adding subscribers pretty quickly.”

Meanwhile Reliance’s head of corporate communication, Jimmy Mogal, states that the company has a policy not to comment “on any of the vendors we do business with.”

According to IDC's Bakhshi, Lucent's struggles are "a relatively minor issue, the kind that can be resolved with a little more fine tuning, and a little more time."

Minor or otherwise, the problems will do little to alleviate market skepticism over Lucent’s 2004 profitability pledge.

“The vendor most likely will be able to recognize the revenue next quarter, but the damage -- in terms of the unforgiving response of the street, and the embarrassment to the company -- is done,” adds Bakhshi.

— Justin Springham, Senior Editor, Europe, Unstrung

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