Lucent Spinoff Comes with a Big Asterisk

FRAMINGHAM (03/01/2000) - Lucent Technologies Inc. isn't sending 100 percent of its enterprise portfolio over to the new enterprise spinoff it announced yesterday. And that could spell additional challenges for the new company as it tries to get its bearings in the enterprise data market.

Lucent officials confirmed yesterday afternoon that it is keeping for itself the enterprise-class products that were included when it acquired fast-growing data players Ascend Communications Inc. and Xedia Corp. in 1999.

Those products are primarily WAN edge devices, including Xedia's VPN (virtual private network) router family, which is now called Lucent AccessPoint. They also include offshoots of Ascend's Pipeline remote-access family, including the SuperPipe family of multiservice access devices launched last year that are aimed directly at branch offices and telecommuters.

Lucent is even going to keep some of its own homegrown WAN products aimed at VPN implementations, including a firewall appliance and the Security Management Server.

All of these acquired and homegrown products are currently included in a group called the WAN Systems Group. Tellingly, the WAN Systems Group had been included in a recent reorganization at Lucent that created for the first time an Enterprise Networking Systems (ENS) business unit joining up voice and data products. Yet under the new plan, WAN Systems is not going over to the spinoff, even though it is designed as an enterprise networking play and includes PBX (private branch exchange), call center, Ethernet, ATM (asynchronous transfer mode) and cabling product families.

The decision to hold out this key group from the enterprise spinoff could further complicate the efforts of the spinoff's data side -- primarily consisting of the Cajun campus Ethernet and ATM products -- to find an installed base it can successfully sell to.

Of the US$8 billion in revenue represented by the enterprise spinoff, the vast majority is PBX and call-center-related, says IDC analyst Esmeralda Silva. The LAN switching line contributed only $270 million for 1999.

And that pairing hasn't borne many dividends, she says. "It's unfortunately still the case that having PBX expertise does not mean you're going to be able to sell LAN switching systems into the enterprise space," Silva said.

She suggested that the Lucent spinoff may now try to reposition the Cajun line as ideal for e-commerce data centers -- not only for enterprises but also for Web hosting providers and application service providers. The company could attempt alliances or acquisitions with others emphasizing e-commerce infrastructure.

Peter Bernstein, president of Infonautics Consulting in Ramsey, New Jersey, said that the spinoff could also pursue new opportunities, such as acquisitions of (CRM) customer relationship management software firms. These are opportunities Lucent management hasn't pursued much recently, instead seizing big opportunities in optical networking for service providers.

Lucent may also be keeping the VPN products simply because they're hot. Howie Gittleson, vice president of engineering for the WAN Systems Group, says the group's product lines are growing at a compound annual rate of 50 percent. The bulk of the spinoff's product lines -- the PBX-related systems -- are generally considered to be growing only in the high single digits or the teens.

Gittleson also explained that VPN products generally straddle the line between enterprise and service provider, because service providers often want to deploy them on customer premises for managed enterprise services.

Join the newsletter!


Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

More about AscendAscend CommunicationsIDC AustraliaInfonauticsLucentLucent TechnologiesSystems GroupXedia

Show Comments