Surprise! I like Lucent
May 23, 2001 12:00 AM ET
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I don't know, maybe I'm getting soft.
I'm feeling a bit more charitable than I have in the recent past about Lucent Technologies (LU).
That's right, Lucent, or as it is also known, "The Company You Love To Hate." There has been a lot for shareholders to hate about this stock lately. If you bought Lucent shares at $50 any time in the past year, I'll bet money that your hairline has receded a bit as you watched Lucent's stock price crumble to as low as $5.50 a share.
Something right
I could go on to list all the various messes Lucent has gotten itself into over the past year, and I have done so here many times, most recently just two weeks ago (see "Death, taxes and Lucent"), so there's no reason to bang that gong again. Why not? Lucent actually did something right this week. It sold a bunch of DSL equipment to Qwest Communications International (Q).
I think Lucent was ready to tout how much it made off of this one, because a company spokesperson told me it would have disclosed how much the deal was worth were it not for Qwest putting the kibosh on that bit of chest-beating. But dollars aside, Lucent got a good deal here for several reasons.
For one thing, the deal shows Lucent still has some gas in the tank. Lucent got punished last year because it was late getting in on the fiber-optic networking game, and lost deals and market share to Nortel Networks (NT). So much attention was paid to Lucent's optic mishaps that a lot of people forgot Lucent did anything else. Like sell DSL equipment.
Betting on DSL
The Qwest deal means that Lucent's gear is going to be used to connect up to 2.5 million new homes to the Internet via DSL by the end of 2002. While many carriers are cutting capital spending, Qwest is willing to write what is surely a decent-sized check to ensure it will be able to offer DSL in a good chunk of the U.S.
And Lucent, which has been rightly chided for dragging its feet on business decisions, has at least shown that when it needs to, it can get deals done with faster-moving telecom companies.
By winning the Qwest account, Lucent also rubbed off some more of the luster of Cisco Systems (CSCO), which had counted Qwest as a big DSL customer. And, with Nortel announcing it is getting out of the DSL equipment business, Lucent has one less major rival with which to compete.
What's more, the Qwest DSL deal could make Lucent a more attractive partner for Alcatel (ALA). One of the worst kept secrets in telecom right now is that Lucent and Alcatel are discussing a merger of some sort, in part because Alcatel wants to get a stronger foothold in the U.S. If it buys or merges with Lucent, the French company would have a major DSL customer in place.
Struggle not over yet
Now one DSL deal does not a comeback make. Lucent is still struggling. Any company that posts a net loss of $3.7 billion and restructuring charges of about $2.5 billion in one quarter, like Lucent just did, has got problems. And if Alcatel does end up buying Lucent, in some ways it will be the ultimate surrender for a company that, for a while, epitomized the strength of the New Economy.
But most importantly, Lucent is showing that it can compete. It is in the middle of a massive restructuring program that will produce some kind of Lucent that will -- I hope -- be more focused on what it does well and will not be held down by hubris or excessiveness. This Qwest deal could be a sign that the new Lucent, one that can learn from its mistakes, is finally emerging.
Whatever happens, and I can't believe I'm saying this, Lucent did the right thing -- at least for this week.
Rex Crum is a reporter at Upside.com covering telecom, broadband and wireless. If you would like to submit a letter to the editor regarding this story, email online@upside.com. |
