Infrastructure: Lucent wields check book to plug data gaps
totaltele.com
By Joanne Taaffe
01 February 1999
Lucent went on a spending spree in January to resolve its ailing data and billing
strategies. But not all vendors see large acquisistions as the remedy.
At a recent conference in Paris, Serge Tchuruk, Alcatel's chief executive, suggested
that Ascend Communications Inc., for which Lucent paid about $20 billion in shares
last month, was overpriced.
By Tchuruk's calculation, Lucent paid about $15 million per engineer, as opposed to
the average $3 million to $4 million per-engineer price tag on a good datacoms
start-up, making it a risky undertaking.
But of course Lucent did not just buy engineers. The Murray Hill, New Jersey
company is also getting well-established, market-leading ATM and remote access
products for carriers, Ascend's customer base, and technology that will enable it to
cater for the demands of new types of carriers, said Neil Rickard, an analyst with
Stamford, Connecticut-based consultancy The Gartner Group Inc.
Lucent has acquired the expertise that will help it to build data networks, and a
number of Lucent's products, such as its access servers, are likely to be subsumed
into Ascend's equipment or discontinued, according to a Lucent product manager.
The Ascend purchase could also sound the death knell for equipment gained from
Yurie Systems Inc., bought in May 1998 for $1 billion, Rickard added.
But such product overlap is relatively unimportant, he argued, as the acquisition is a
much-needed and sensible move for Lucent.
So where are the gaps in Lucent's armory? Two glaring ones are its incomplete
international reach and lack of equipment, such as routers and switches, for large
corporates. Lucent has been "basically a U.S. company with the odd off-shore office,"
according to Rickard.
Lucent's executive vice president and chief operating officer, Ben Verwaayen, said
Lucent has now managed to increase its international sales to about 30% of revenues
by the end of the last quarter.
A confirmation that Lucent needs to win market share abroad came when it bought a
12.2% stake in Spanish equipment manufacturer, Amper SA, from Telefonica SA on
the same day it snapped up Ascend. Lucent is now the Spanish operator's "preferred
equipment supplier."
With a combination of the Telefonica deal, sales to ISPs and the addition of Ascend's
customer base, Verwaayen insists that Lucent is on track internationally, describing
his company's strategy as "multi-local" - at home in any place - and pointing out that
it has established eight Bell lab facilities in Europe.
Although Rickard agrees that Ascend's more balanced share of sales between Europe,
Asia and the United States will help Lucent, he still sees distribution in Europe as
"patchy at best."
Even if Lucent can redress its U.S. bias and bump up sales outside its home market, it
has yet to clearly spell out how it will attack the corporate market.
Unlike its competitor Nortel Networks, which got enterprise data equipment through
its purchase of Bay Networks, Lucent has acquired a narrower set of goods for the
carrier market from Ascend. Lucent has yet to pull together a product line that rivals
competitors Cisco Systems Inc., Nortel Networks, and the 3Com/Siemens/Newbridge
Networks alliance, Rickard believes. This could mean further acquisitions, Verwaayen
acknowledged.
Another Lucent strategy, in line with its rivals, is to win customers by offering
value-add software, such as network management and now, with its purchase of
Kenan Systems Corp., billing and customer care software: Lucent has described
Kenan as an important part of its globalization plans.
Buy or ally? How major vendors are tackling the data
market
Europe's major switch manufacturers know they need to add data expertise to be
globally competitive, but are adopting a variety of approaches.
While Munich-based Siemens AG has chosen a development and distribution alliance
with 3Com Corp. and Newbridge Networks Corp., Alcatel and L.M. Ericsson AB are
concentrating on buying small U.S. companies.
Ericsson claims it wouldn't do it any other way. The Swedish company last year
restructured its datacoms division to form five units, and is adding to each unit
through acquisition as the opportunity arises, said Mike Thurke, Ericsson's vice
president and general manager of datacoms and IP services.
Rather than buying a large datacoms company, where there may be product overlap
as well as outdated products to support, Ericsson is seeking out complementary
"leading-edge" datacoms companies, said Thurke.
This led to the purchase of Santa Barbara, California-based remote access company
ACC and a stake in high-speed router company Juniper Networks Inc. Such an
acquisition strategy, however, fails to give Ericsson a huge injection of customers and
significant distribution channels into the United States, where it is trying to improve
its market share, said a chief executive of a U.S. datacoms company, who wished to
remain anonymous.
Alcatel's steps to provide its customers with datacoms equipment include a
development and distribution deal with Ascend and distribution OEM agreements
with Cisco Systems Inc. and Xylan Corp. Alcatel looks unlikely to continue its
relationship with Ascend, but said it has "taken steps to protect technologies we're
working on with them, particularly software."
Otherwise, like Ericsson, Alcatel has been acquiring small and medium-sized datacoms
companies for their corporate and carrier product lines, including gigabit router
specialist Packet Engines Inc. and access vendor DSC Communications Corp.
Despite their different approach, both companies agree with Lucent on the importance
of software and services. "Competitive strength is often at the higher level ... IP
services, network management, ease of operation," said Thurke.
Lucent Acquisition Briefs: January 1999
11 January 1999: Lucent acquires privately held billing software company Kenan
Systems Corp., of Cambridge, Massachusetts, for $1.48 billion. In doing so, Lucent
not only buys into a growing market, it also furthers its European reach via Kenan's
existing customers. Lucent will fold Kenan into its Communications Software Group,
which will be headed by Kenan's founder and chief executive Kenan Sahin.
13 January 1999: Lucent buys remote access, frame relay and ATM vendor Ascend
Communications Inc., of Alameda, California, for $20 billion in stock. Ascend had 1998
net sales of $1.479 billion and net income, excluding acquisition charges, of $247.3
million. Ascend will join Lucent's Broadband Networks Group, headed by chief
operating officer Dan Stanzione.
13 January 1999: Lucent buys into the Spanish and Latin American market by
paying Telefonica SA $47.4 million for a 12.2% stake in Spain's largest manufacturer of
telecoms equipment and systems, Amper SA. Lucent will become Telefonica's
preferred supplier, and has first call on Telefonica's remaining share of Amper, which
the Spanish carrier plans to sell during the next three years.
Information : info@total.emap.com
URL : totaltele.com
© EMAP Media 1999
|
