IBD interview with MCGinn c/o SI board
IBD. Lucent Moving At Light Speed Into New Era
Date: 3/15/99
Author: Michele Hostetler
Lucent Technologies Inc. hopes to see the light this year. Fiber-optical
light, that is.
Fiber optics, now used mainly in long-distance networks, will make its
way to corporate
networks in the next few years, says Richard McGinn, chief executive
of the largest seller
of
telecommunications gear.
Fiber optics - glasslike wires that use light to send information
hundreds of times faster
than do
copper phone wires - will play a key role in melding data and voice
onto the same
networks,
McGinn says.
Lucent is squaring off in this emerging converged-network market with
longtime rival
Northern
Telecom Ltd. and data networking leader Cisco Systems Inc., among
others.
McGinn recently talked with Investor's Business Daily about how he
sees communications
networks evolving.
IBD:
What is your vision for networking?
McGinn:
There are truly fundamental, dramatic changes taking place today in
the industry that we
define as
communications networking. We have a march of technology occurring
in
semiconductors,
software, photonics and wireless that is disrupting conventional
wisdom about networks.
There
are literally convulsions occurring in the markets these days.
We are moving from a world where a lot of enterprises and service
providers . . . selected
parts
or boxes and then . . . knit those things together to deliver the services
they needed. These
networks tended to be application- specific, like voice.
The architecture we're heading toward is a network of networks that
is multiservice,
high-performance, very highly reliable and increasingly cost-effective.
Prices are coming
down, . .
. and we can measure it in percentages - plural - every month, not
unlike the curves we've
seen in
the past in the PC industry. We're seeing performance going up
dramatically. In optical, as
an
example, it's even faster than Moore's Law (which says chip
performance doubles every
18
months).
IBD:
How is optical technology changing networking?
McGinn:
That is literally an embryonic network. Photonics is where silicon
technology was 15 years
ago.
It's really at the beginning stages, maybe the first inning of play.
You're going to move
from the
tremendous carrying capacity of broadband optical in long-distance
telephone networks . .
. to
metropolitan- area networks and then campus-area networks and
ultimately at the local-
area
network.
The beauty of this is that companies will wind up with dynamic
bandwidth - individual
wavelengths on fiber-optical systems. Ultimately, as you move to the
enterprise (a
company's
local-area network) in three to five years, you'll see a substantial
flattening of (traditional
gear
sales). You'll see less need for the hodgepodge of active electronics
in these enterprise
networks
that today are characterized by hubs, routers and so on. This is really
quite a major leap
forward
for the enterprise. Photonics (use of fiber optics) is transforming the
way networks are
deployed.
It's evolving even as we speak.
IBD:
When will fiber optics become more widespread?
McGinn:
We are supplying carrier- grade optical networks to certain
(corporate) campuses today.
They
tend to be superheavy users, not the normal kind of businesses. But
I'd expect within 12 to
18
months you will see the firm implementation of metro- area optical
networks going in
(thanks to)
new low-cost technology.
And within two to three years, the market will begin to pick up
substantially for campus
and
individual-building optical networks. That puts huge pressure on the
status quo in the
enterprise
marketplace in terms of hubs and routers.
IBD:
The latest in fast gear for service providers and carriers is terabit
routers, a step up from
gigabit
routers. Do you plan to buy any of the start-ups that are developing
such routers?
McGinn:
We organically and through acquisition are going to serve all the
requirements necessary
to
deliver these full networked offerings. I think we've demonstrated with
quite a number of
acquisitions and one pending that we are quite willing and able to both
develop on our own
and
acquire companies. How's that for a non-answer?
IBD:
How do you see network traffic evolving? Voice now accounts for 80%
of phone
carriers'
revenue, and data 20%.
McGinn:
I guess what I hear is voice traffic is growing somewhere between 3%
and 5% a year, . .
. and
data traffic for the Internet is growing 50%, 80%, pick your favorite
large number. I think
it's safe
to say . . . we'll reach a parity probably within five years in terms of
the amount of traffic
that's
moving around man to machine and machine to machine vs. human to
human.
IBD:
What's Lucent's strategy for moving from just voice to voice-data
networks?
McGinn:
It's a piece-by-piece basis. There are those who would say one size
fits all. Our (voice)
customers are telling us they are going to make the move to either
migrate from their
existing
network or have their existing networks progress or reside alongside a
data network.
New carriers coming in probably are going to go with a data network
architecture to start
with.
You've got different business strategies . . . driving the direction that
people take in data
networks. We're addressing each of them.
IBD:
How are you positioning Lucent against Cisco and Nortel?
McGinn:
We consider them to be two very good competitors in the field,
coming from two different
perspectives. We have to position ourselves not vis-a-vis them, but
according to what
customers
are telling us. |
