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Technology Stocks : LUMM - Lumenon Innovative Lightwave Technology Inc. -- Ignore unavailable to you. Want to Upgrade?

To: topstock who wrote (557)	7/25/1999 10:12:00 AM
From: Don Johnstone	Read Replies (2) \| Respond to of 2484

Cisco/Lucent. Who will win? forbes.com:80/forbes/99/0705/6401052a.htm ~~~~~~~~~~~~~~~~~~~~ In the brawl between Lucent and Cisco, so far both sides are winning. That can't last forever. Collision course By Scott Woolley "THERE IS NO immutable law of physics that says giant companies can't continue to grow at 20%-plus a year," says Richard McGinn, Lucent Technologies' chief executive. No law, maybe, but it is a mighty fleet pace for a behemoth like his, which just hit $33 billion in annual sales. And yet Lucent has often eclipsed it—last quarter growth was a blistering 33%. McGinn has wowed Wall Street with his ability to make Lucent act like an Internet startup. Its stock is up eightfold since AT&T spun it off three years ago. Yet to keep Lucent growing at its current clip, the 52-year-old McGinn must clear major hurdles. Looming in the distance is the most ominous obstacle, Cisco Systems, the Internet-equipment powerhouse that, one-third Lucent's size, is growing twice as fast. It's a long-anticipated fight. The two companies' core businesses—Lucent's gear for voice networks and Cisco's for data networks—are rapidly converging. But so far the rivalry has been less than bloody. These two giants have largely forgone attacking each other, preferring to steal business from the weak. In a hot market that's growing 14% a year, Lucent is on track to hit 20% sales growth before acquisitions; Cisco is growing 41%. In the past nine months both stocks have doubled. "You have a barbell market structure being established," McGinn says. "The big are getting bigger, the midsize are getting squeezed, and smaller players [that often invent breakthrough technology] are attaching themselves to the bigger guys." In an industry full of bravado and outsize personalities, McGinn seems a virtual shrinking violet. He is in no hurry to go head-to-head with Cisco. While his Ascend acquisition, set to close in late June, has been played as a direct challenge to Cisco, it simply shores up Lucent's dominant position as a supplier to big carriers. That's in contrast to Nortel, Lucent's traditional rival, which acquired Bay Networks last August to directly attack Cisco's original market, corporate networks. In contrast to the cautious McGinn, Cisco chief executive John Chambers is already talking all-out war, even if the fighting with Lucent hasn't really begun. The 49-year-old Chambers is given to bold pronouncements: Telephones are obsolete; all voice calls will become free; Lucent's technology is outmoded. While such talk clearly gets under McGinn's skin, he hews to a more polite course. In many market segments Cisco is "the best sales engine out there." He also has no doubt that the two companies are on a collision course. Last month Cisco's Washington office chucked its old phone system for one that works using Internet-style packets to carry voice and data. The pilot project still has kinks, but Cisco says by year-end the system will be on the market for 80% to 90% less than the traditional Lucent offering. One problem for Lucent is pure image. In May, Convergent Communications, a company building networks for small to midsize businesses, considered Cisco, Lucent and Nortel for a $104 million purchase—and picked Cisco. Much of the decision came down to image. "We picked Cisco largely because we wanted to be seen as data guys," says Philip Allen, Convergent's executive vice president. McGinn knows his old businesses are vulnerable, and he mentally divides Lucent into two parts: attackers and defenders. While more attention gets paid to the 50% of Lucent's business McGinn figures is playing defense, the other 50% has plenty of newfangled surprises to throw at Cisco. He plans to counter Cisco's Internet edge with secret weapons of Lucent's own. The company's famed Bell Labs produce a remarkable 3.5 patents a day. McGinn wants to push new fiber optics and chips, areas where Lucent leads, into networks that leap ahead of Cisco—and everyone else. Example: Lucent's fancy fiber-optic gear started out in transcontinental cables. Now it's entering individual cities. Lucent's attack plan is to push fiber deeper into individual office buildings—Cisco's home territory—and eventually get fiber lines plugging into individual PCs. "The right architecture is to route a wavelength [of light] all the way through the network straight into the desktop," says Harry Bosco, who runs Lucent's optical networking division. Suppliers of such networks will need to understand things like fiber-compatible chips and tunable lasers, areas where Lucent leads the pack and Cisco is weak. Telecommunications is enjoying a renaissance thanks to the doubling of fiber-optic capacity every year. Just as Moore's Law—the doubling of computer-chip speed every 18 months—drove Intel's ascendance, so, too, are fiber optics and the Web feeding Cisco's and Lucent's explosive growth. But the way these two titans are going, telecom won't be big enough for the both of them. ~~~~~~~~~~~~~~~~~~~~ And LUMM sits on the sidelines watching the battle! But who is LUMM cheering for?? Cheers, Don