Ascend deal plugs Lucent
ATM leaks
Blockbuster combination could
spawn integrated voice, data
network services.
By Tim Greene and David Rohde
Network World, 01/18/99
Murray Hill, N.J. - While the
Lucent/Ascend merger last
week came as no surprise,
the $20 billion deal gives
Lucent - the circuit switch
king - additional packet and
cell technology to satisfy
the needs of new carriers
looking to offer integrated
voice, data and video
services.
Without Ascend, Lucent
didn't have enough IP and
ATM products to entice
leading-edge carriers
touting IP-everything
services, or to beat back
the advances of Cisco,
which is banging on the
doors of Lucent's
customers.
In announcing the merger,
Lucent Chairman and CEO
Richard McGinn and Ascend
President and CEO Mory
Ejabat said future carrier
networks will support
customer services over one
unified backbone.
While Lucent has the optical
backbone technologies that
carriers want, the company
lacks an ATM core switch
that is as scalable and
manageable as Ascend's CX
550. In fact, since last fall,
Lucent has been reselling
the CX 550.
"Lucent had a really big
hole in its product line,"
says Liza Hendersen,
director of consulting for
TeleChoice, a Boston
consultancy.
"Lucent had a piecemeal
approach," agrees Matt
Barzowskas, vice president
of First Albany, a financial
firm in Boston. "It had to
make a big move, and
Ascend has the broadest
product range."
While the companies share
a belief in ATM, they arrived
at the common vision from
different angles. Ascend
grew up as a key player in
dial-up Internet access
hardware, but evolved into
one of the crucial providers
of ATM switches to carriers.
Lucent was born of the Bell
system and has a
voice-centric heritage.
Lucent has added to its line
over the years and will have
some product overlap with
Ascend, notably, the Lucent
PortMaster 4 high-end
access concentrator and
the Ascend MAX TNT. "I
would keep the TNT, which
has a greater presence in
ISP networks," says John
Morency, an analyst with
Renaissance Worldwide.
Another option may be to
meld the MAX TNT with the
PortMaster, says Frank
Dzubeck, president of
Communications Network
Architects, a Washington,
D.C. consulting firm.
Lucent's boxes are higher
capacity than Ascend's,
"but the software doesn't
compare a lick to what
Ascend has," he says.
Neither company would
comment on product plans.
Whither the
enterprise?
While the Ascend deal
improves Lucent's carrier
pitch, observers say it does
little on the enterprise front,
particularly in the
company's competition with
Nortel Networks, which last
year bought Bay Networks.
McGinn makes it clear that
carrier networks are his first
priority. "This move with
Ascend clearly solidifies our
position as the undeniable
leader in communications
networking for service
providers," he says.
As for the enterprise,
McGinn says, "We will, as
well, be investing
organically and as
appropriate to further our
enterprise business."
Company officials have
repeatedly downplayed the
idea that Lucent would buy
a traditional router vendor
because they see the
business as relatively
slow-growth and
low-margin.
"Lucent can't compete in
the cost-per-port world,"
Dzubeck says. "It has an
overhead structure that
would choke a horse."
Another factor in
sidestepping the enterprise
is, not surprisingly, Cisco. In
Lucent's view, "fighting
Cisco where it dominates is
a losing proposition," says
Christine Heckart, vice
president of TeleChoice.
Lucent officials are quick to
point out the company gains
an entree to make
enterprise data sales
through its large installed
base of PBX and call center
customers, particularly in
newer, high-speed markets
that are up for grabs. For
example, Lucent's LAN
switching group in Concord,
Mass., claims to have sold
more than 125,000 ports of
its Cajun P550 Gigabit
Routing Switch, which has
Layer 2 and Layer 3
switching capabilities.
But Lucent's main
enterprise push is managed
services, which the
company offers through its
NetCare service subsidiary,
Dzubeck says. Doug Ruby,
vice president of product
marketing for Lucent's
enterprise group, confirms
that most data product
sales include NetCare
services.
Ironically, NetCare has sold
a large number of routers
and other gear from Bay
under a 1995 partnership.
But now those sales are
beginning to transition to
Lucent's Gigabit Ethernet
and campus ATM products.
Lucent's enterprise sales
account for some $8 billion
of its roughly $30 billion in
annual sales, but the bulk of
that is from sales of PBXs,
call centers and voice
messaging systems. Ruby
says LAN switching
accounts for just more than
$250 million per year in
revenue.
The merger with Ascend is
scheduled to close at
mid-year, meaning an
integrated service pitch
from the merged company
might come in the third
quarter. |
