Lucent is stripping itself clean

Lucent Technologies Inc. (LU) has a problem: It hasn't got much of itself left to sell.

The once high-flying telecommunications equipment maker confirmed Wednesday that it is trying to unload its Atlanta-based Optical Fiber Solutions division, a move that had been rumored for weeks. And next week, the company is scheduled to unload Agere, its microelectronics group, in what has the potential to be the second-biggest public offering in history.

Once those sales are completed, however, the company will have few assets left to hawk, crimping cash-strapped Lucent's current strategy for raising the funds it needs to turn itself around. Lucent's idea is to sharpen its focus on design, manufacture and marketing of systems, software and services for telecommunications companies. It's a sensible way to focus its business, but Lucent is a long way from pulling it off.

Selling Optical Fiber Solutions, one of the world's top makers of advanced optical fibers and related technologies for the telecommunications industry, will help Lucent stay solvent. However, the company may be sacrificing too much as it tries to resolve its financial woes.

Selling a profitable business such as the fiber division is not something a healthy company would likely consider, especially not in these depressed market conditions. On top of this news, Lucent recently established a new credit line that will bankroll the company through at least 2003. But to get that credit line, the company has had to guarantee much higher levels of performance, which puts an incredible strain on all its remaining business units to generate significant revenue.

Lucent has traditionally built its businesses around building equipment for voice networks, which are built around circuit switching technology. But the next generation of networks is increasingly being built around data networking, in particular Internet networking standards. "Lucent has no heritage in data networking," said industry analyst Hilary Mine of Probe Research. "Culturally, it's a hard thing to change from thinking about voice to thinking about data."

For Lucent to get healthy, the company needs to have news touting new products that will help it compete against Cisco and Nortel in data services, and less news of spin-offs and sell-offs.

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