Lucent kills core switch; layoffs expected

Lucent Technologies in Murray Hill, N.J., is shutting down development of its TMX 880 core network switch, a company official confirmed Thursday.

The news was given to about 200 employees last Friday in Westford, Mass., said company spokesman Richard Muldoon. He said the decision will result in layoffs of workers on that project, but he wouldn't disclose how many. Several news reports, citing unnamed company sources, said more than 160 workers could be let go.

The company has been subject to several rounds of layoffs in the past year and intends to lower the size of its workforce to 35,000 workers by Jan. 1, down from the current level of 45,000, Muldoon said.

The TMX 880 was announced in November 2001, and had been in trials with service providers, the spokesman added.

Muldoon said the discontinuation doesn't mean Lucent will abandon the Multiprotocol Label Switching (MPLS) space.

"We had some learning from the 880," he said, noting that CEO Patricia Russo told investors recently that Lucent will continue to invest in MPLS and enhancements for its GX 550 core Asynchronous Transfer Mode (ATM) switch and the CBX 500 edge switch, as well as the PSAX edge concentrator.

"Absolutely, the knowledge we have of core ATM networks gets leveraged," Muldoon said. He called ATM a "living market," with Lucent active in 27 of the 30 largest ATM markets worldwide.

In the earnings call on Oct. 23, Russo talked of focusing on products that are part of market opportunities that are "near and clear," which includes restructuring around products such as the TMX 880, Muldoon said. Russo wants Lucent to be profitable by September 2003, even as the gear maker has seen 10 straight quarters of losses.

Contrary to the faith Lucent has put in the GX 550 and the CBX 500, analyst Tom Nolle at CIMI Corp. in Voorhees, N.J., said killing the TMX 880 "almost forces Lucent to sell off the remainder of the 500/550 product set, as has been rumored."

Nolle said the TMX 880 had not been gaining traction with carriers "at all" and that Lucent had been having problems meeting feature delivery requirements.

Unless Lucent announces a clear replacement to TMX 880, he said Lucent will be out of the MPLS business and possibly all ATM products. Lucent, similar to Nortel Networks Corp. in Brampton, Ontario, can't afford to stay at current staffing levels and faces a possible future of becoming a "low-profit provider of commodity technology to carriers," Nolle said.

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