thestreet.com. Lucent Unveils Internet Telephony Products
thestreet.com
By Kevin Petrie
Staff Reporter
5/27/98 6:07 PM ET
Lucent (LU:NYSE) unveiled products Wednesday that
enable phone carriers and Internet service providers to
exploit the "revolutionary" convergence of phone and
computer networks. But an exiting Lucent scientist says
the market for Internet-based telephone service,
supposedly a driving force in this convergence, remains
puny.
Next month, MCI (MCIC:Nasdaq) will start testing
Lucent's PacketStar IP switch, which is designed to
compete with Cisco's (CSCO:Nasdaq) router products by
using cheap silicon chips rather than software. The
PacketStar promises to handle faxes, voice calls or video
streams over computer networks, while enabling phone
carriers to ensure different service levels for different
customers. Lucent expects to be able to ship full production volumes in the fall, although it has booked no commercial orders.
Another product allows carriers to handle data from old
copper phone lines using such technologies as integrated
services digital networks and digital subscriber lines. And
a so-called gateway will convert voice signal streams into
digital packets for Internet travel.
Lucent's Bell Labs built all three products.
Funniest thing: Arno Penzias, who retired this month as
chief scientist of Bell Labs, seems cool on Internet
telephony.
"It's a little, cute business," Penzias says in the June 8
issue of Fortune. For example, customers are tepid on
sending faxes over the Internet, Penzias says. Lucent has
a product that is "slick as a whistle, a product that can
save $10 billion a year, and no one's using it."
A Lucent spokesman sees no contradiction. He says the
products Lucent introduced Wednesday will make Internet
telephone service more appealing and allow carriers to
direct traffic more effectively.
Tech Analyst Tango
Robertson Stephens has lost a chip from its research
team.
Networking analyst Tim Savageaux is taking his show to
Volpe Brown Whelan, a boutique I-bank focusing on
tech and health care. His predecessor, Amar Senan, will
shift to Volpe's I-banking efforts.
The analyst's move comes during a time of turmoil at
Robbie Stephens. BankAmerica (BAC:NYSE) has the
firm on the block because of its pending merger with
NationsBank (NB:NYSE), which owns Robertson
Stephens rival Montgomery Securities.
"There's so much turbulence at Robbie these days," says
Peter Rogers, tech research director for Volpe. Savageaux
resigned from Robbie last month, and after a hiatus in
Hawaii he'll start work in early June.
"We really want to build up this banking practice," Senan
says. Senan has vacated his research seat to join Adam
Cioth, a 10-year veteran of Goldman Sachs' tech banking
team, who joined Volpe five years ago. Senan says the
firm also recently hired Jim Feuille, who was head of UBS'
tech banking unit for the past three years.
Volpe and its predecessor Volpe Welty have underwritten
recent stock offerings by Pegasus Systems
(PEGS:Nasdaq), Ascent Pediatrics (ASCT:Nasdaq) and
Cognicase (COGIF:Nasdaq).
While he isn't ranked by Institutional Investor, Savageaux
made a prominent cautionary call on the optical networker
Ciena (CIEN:Nasdaq) on March 30. He wrote in a
research note that Ciena's rich stock might be hobbled for
a while by fierce competition and the slow purchasing
decisions of its phone-carrier customers. A crowd of
Ciena shorts and Lucent bulls agreed with Savageaux at
the time, and the shares bottomed near 38 a week later.
Since then they have climbed to about 50. The jury is still
out on Savageaux's call for the medium term: Last week
Ciena beat quarterly earnings estimates by 2 cents per
share, although nagging uncertainty about contracts
prompted some investors to push the stock lower after the
report.
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