Lucent Closes Stinger's Westlake Development Hive
C.A. - July 25, 2002 - Lucent Technologies, as part of its most recent round of financial/corporate restructuring and layoff of 7000 more employees, is shutting down its Westlake, California offices where the company's Stinger DSLAM platform was developed and supported. Lucent has announced that a transition team is working to keep the product alive and training a new staff in New Jersey, where the Stinger group will be relocated. The Westlake office employed approximately 125, consisting primarily of engineering staff, but Lucent has not yet determined or disclosed the number of employees that will be relocated from California to New Jersey, and reports indicate that nearly the entire engineering staff was fired.
Analytical Summary
· Current Perspective: Slightly negative on Lucent's closure of its Stinger development center, because Lucent has terminated most of the engineering staff that designed and developed the current Stinger platform, who were in the process of developing Lucent's next-generation DSLAM platform.
· Vendor Importance: High to Lucent because the closure of the Westlake facility, staff termination, and relocation of the Stinger design/development resources to New Jersey will be a crucial test for Lucent in the near to mid-term as it looks to right its ship financially and maintain its level of success in the DSLAM market.
· Market Impact: High on the DSLAM market because Lucent has established a solid second-place in the global DSLAM market (including number one market share in the SDSL segment), and its Stinger office closure opens the door for rival DSLAM vendors to direct fear, uncertainty, and doubt (FUD) at Lucent and win customers at Lucent's expense.
We are taking a slightly negative stance on Lucent's closure of its Westlake, California Stinger office. In closing the Westlake office and terminating 100+ Stinger engineers, Lucent is losing a great portion of the Stinger's knowledge base, or approximately 80% of the engineering staff. This severe reduction in engineering staff will reduce Lucent's ability to offer new Stinger features and upgrades in a timely fashion, including the availability of OC-12 uplink interfaces, which Lucent has continually pushed back for more than six quarters. As such, Lucent risks further market exposure as a protracted lack of support personnel may eventually have a negative impact on sales. Lucent must also address the larger and ongoing questions regarding its financial stability, especially following its latest quarterly loss of $7.9 billion and resulting 7000-person "workforce contraction." While Lucent is far more stable than most rival DSLAM vendors, Lucent does not fare well when compared to chief rivals Alcatel and Siemens. Lucent's closure of the Westlake Stinger office may have a dramatic impact on the company's ability to follow through on bringing its next generation DSLAM, already in development, to market in 2003/2004 as planned. In particular, doubts are easily cast on how Lucent will accomplish this task given the personnel/experience deficit.
Rival vendors may point to the Stinger office closure as "evidence" that the Stinger platform is not viable for long-term broadband deployments, as the next-generation of DSLAMs offer higher processing/throughput capacities and support high-density rollouts multi-megabit access services such as Ethernet, Very high bit-rate DSL (VDSL), and fiber-to-the-user (FTTU)-based technologies.
However, there are some positives regarding Lucent's closure of the Westlake Stinger office. For example, the termination of its 100+ Stinger engineers (which represents less than 2% of the 7000 employees axed in Lucent's latest round of layoffs) demonstrates that the company is willing to implement the measures necessary to ensure the company's survival of dire financial straits and tough market conditions.
Also, the relocation of the Stinger design/development center to New Jersey brings the DSLAM group closer to Lucent's AnyMedia Digital Loop Carrier (DLC) group, which should enable Lucent to maximize its broadband product development resources and benefit from synergies between the two groups, whose relations will become increasingly interrelated. And Lucent's current Stinger platform supports the highest DSL subscriber port density/scalability on the market by a significant margin, effectively giving Lucent a marginal, near to mid-term technology lead as the subscriber metrics are highly important in terms of product marketing and competitive differentiation.
As the demand for broadband access services continuing to outpace service availability, combined with the RBOC/telco desire to win the triple play (i.e., voice/data/video) service war against the cable operators, DSL still represents a very strong source of incremental new revenues for the LECs and IXCs moving forward.
The Stinger's ability to support very high numbers of DSL subscribers compared to rival DSLAMs gives Lucent a very strong solution moving forward, in both the residential and business-class DSL markets. In fact, Lucent has managed to establish a strong second place in the overall DSLAM market, taking 13.6% of the global DSLAM market in CY2001 and winning 10.7% of the market in Q1 2002 (one of only three vendors with double digit market share) according to Synergy Research, despite the currently unfavorable market conditions where carrier capital expenditures (CapEx) have been down for over five quarters.
In terms of the actual Stinger product portfolio, one of the major criticisms of Stinger is that while it offers some of the highest DSL subscriber port density/scalability metrics on the market, the Stinger's architecture does not support "future-proof" aggregate backplane/throughput capacity (currently 7.2 Gbps on the flagship Stinger FS+ model, which has been surpassed by platforms offering anywhere from 40 to 130 Gbps of throughput). Several new DSLAM platforms now offer superior metrics, at least on the spec sheets, including Copper Mountain's VantEdge series (3000 for ANSI markets and 3300 for ETSI markets) and Nokia's relatively new D500 platform. Both the Copper Mountain's VantEdge 3000 and the Nokia D500 support very high DSL subscriber port density/scalability metrics (currently 912 per chassis/2736 per rack each, with Copper Mountain touting twice the density/scalability when its 96-port line cards are available). And in terms of throughput capacity, the VantEdge supports up to 130 Gbps while Nokia's D500 supports 80 Gbps (both full duplex, and dramatically higher than Lucent's current flagship DSLAM, the FS+, which supports 7.2 Gbps full duplex per chassis). But while these platforms and others such as AFC's new Telliant 5000 offer compelling scalability and throughput propositions, none of these vendors can reference current customer deployments of these platforms, while Lucent continues to grow its installed base of Stingers.
Finally, the market impact of Lucent's Westlake office closure is that it opens the door for rival DSLAM vendors to direct FUD at Lucent, and win customers at Lucent's expense, because this action, coupled with Lucent's latest financial results, may be construed as a sign of Lucent's corporate instability and cause DSLAM customers to consider rival solutions.
Nevertheless, as an established, Tier 1 equipment vendor with a strong second-place market share in the global DSLAM space, Lucent is still far more stable than many of its rivals, and the current Stinger lineup offers market-leading differentiators. So, while service providers - especially those targeting the business-class, symmetric markets where Stinger has garnered the most success - may be slightly more inclined to consider the solutions of rival DSLAM vendors, Lucent's Stinger portfolio, with its very high density/scalability proposition, is still an extremely compelling solution, and is unlikely to suffer dramatic losses in market share in the near to mid-term. |
