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Technology Stocks : Lucent Technologies (LU) -- Ignore unavailable to you. Want to Upgrade?

To: Matt Meagh who wrote (8256)	6/24/1999 1:13:00 AM
From: puborectalis	Respond to of 21876

June 24, 1999 Deal Between Lucent and Level 3 By SETH SCHIESEL olstering its cyberspace credentials, Lucent Technologies Inc. agreed Wednesday to sell up to $1 billion worth of equipment to Level 3 Communications Inc., the new long-distance communications carrier, for transmitting phone calls using Internet technology. While Qwest Communications International Inc., perhaps the best-known new long-distance carrier, and its older brethren like the AT&T Corporation are using a range of communications technologies in their networks, Level 3 is trying a pure Internet approach. That requires finding ways to transmit not only Web pages but also telephone calls and video signals using Internet technology. Level 3 is using mostly high-speed Internet switches made by Cisco Systems Inc., the data communications giant, in the core of its network. But Level 3 has turned to Lucent, the former equipment arm of AT&T, to help replicate the strengths of the traditional telephone network using Internet technology. Level 3 signed up as the first big company to use a new product that Lucent calls a "softswitch." The softswitch is software that runs on standard computer work stations and is meant to provide the reliability and features of traditional phone switches but at a fraction of the cost. Because Internet technology, known as I.P., breaks communications down into small packets that can travel along different routes, it is often more efficient than more traditional communications systems. "The Lucent softswitch, together with Level 3's I.P. network, will bring customers the best of both the traditional telephone network and the Internet -- ubiquity and reliability combined with rapid cost reductions and innovative new services," said James Q. Crowe, chief executive of Level 3. "Customers will be able to get the same quality of service but at lower cost, and they can further benefit from the continuously improving price-performance of Internet technology." Cisco is developing a rival to Lucent's softswitch called a virtual switch controller, which is being tested by the Sprint Corporation, the No. 3 long-distance carrier. Both products are basically meant to help provide the telephone component for high-speed data switches, many of which were designed to carry E-mail and Web pages, not phone calls. Lucent and Cisco are developing their technologies for standard computers instead of for their own systems in a bid to encourage other companies to develop applications that can fit in their frameworks. Lucent said that its softswitch had been developed for Sun Microsystems Inc.'s Solaris operating system, a version of Unix, and that it would be converted for use on the Microsoft Corporation's Windows NT system, the Hewlett-Packard Company's systems and potentially Linux, a free version of Unix. Under the deal, Level 3 will buy at least $250 million in equipment from Lucent over four years, though the relationship could grow to $1 billion over five years. Only 50 percent to 60 percent of Level 3's spending will be on the softswitch, the rest going for other Lucent products geared mainly for transmitting phone calls using Internet technology. Shares of Lucent rose $3, to $65.6875, while Level 3 rose 43.75 cents, to $70. Lucent plans Thursday to complete its $20 billion acquisition of Ascend Communications Inc., one of Cisco's foremost rivals. But that deal will still leave Lucent without the sort of high-speed Internet router required by the softswitch. That is one reason that Lucent is close to an agreement to acquire Nexabit Networks Inc., a private maker of high-speed Internet switches, for $600 million to $800 million, according to executives close to those talks.