All, <CSCO vs LU? You betcha! And it's all about VoIP.>
I borrowed this from the Cisco board. It's an article that demonstrates how vehement this issue of Voice has become among companies who have not traditionally been involved in it, indeed, companies whose interests have been antithetical to voice from their inceptions. Cisco, in this case.
And what is Nortel doing in the meantime, the other dominant Voice co?
For any remaining doubters of this new technology (VoIP), why would so much attention and financial muscle be applied to a technology by the biggest and the best of breed companies in the world if it weren't slated for the next wave of assured success? At the levels of investments we're looking at you gotta know that even if VoIP had egregious flaws, these companies would 'make' it work.
The latter is not the case, however. VoIP will succeed on the merits of its own efficiencies and flexibilities which happen to be unprecedented in Voice Communications, and will find itself integrated in the larger flows of traffic of all forms.
Regards, Frank Coluccio
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May 10, 1998
Lucent and Cisco staking billions in race to link phone calls, e-mail
By Andrew Brooks and John Shinal BLOOMBERG NEWS
Lucent Technologies Inc. and Cisco Systems Inc. are barreling toward a lucrative new Internet market, putting them on a collision course likely to shake up the way they do business.
The companies are spending billions on equipment that joins phone calls with e-mail and other data on one network. WorldCom Inc., AT&T Corp. and the Baby Bells are demanding the technology to offer high-profit new services to business customers.
At stake are annual sales of $65 billion by 2000. To get the edge, computer-networking leader Cisco needs to please phone companies looking for foolproof equipment, and telecommunications powerhouse Lucent must deliver its goods in speeded-up Internet time.
"The carriers need reliable products, and they want them now," said analyst Craig Johnson of the PITA Group in Portland, Ore.
Neither Cisco nor Lucent is accustomed to playing second fiddle. Cisco sells 80 percent of the gear that routes data traffic on large corporate networks. Lucent has 55 percent of the U.S. market for devices that direct voice calls.
Shares of both are near records, with Lucent surging more than fivefold since its April 1996 initial public offering, to the mid 70s in recent trading. Cisco touched a high of 76 last week, rocketing from a split-adjusted low of 15/32 after its 1990 IPO.
"They're going straight at each other in this market," said Paul Johnson at BancAmerica Robertson Stephens, who rates Cisco "buy."
The nascent market luring Cisco and Lucent is known as "public IP" or "IP telephony" because the equipment links traditional public phone systems with data networks using Internet-based communications, or protocols.
Instead of tying up an entire circuit for a phone call, IP breaks voice, data or video into small pieces called packets, sends them over the line, and reassembles them at the other end. That way, many calls can be sent on the same line simultaneously.
Grabbing a share of the new arena is important as mainstay businesses for Cisco and Lucent slow. Cisco's annual sales growth has ebbed to around 30 percent from more than 70 percent a few years ago amid competition and price cuts from rivals 3Com Corp. and Bay Networks Inc.
Lucent sells to customers such as Bell Atlantic Corp. that still carry about the same amount of voice traffic they did years ago. Internet traffic, meanwhile, doubles every six to nine months.
While both face slowdowns, the companies couldn't be more different.
Cisco is the consummate Silicon Valley start-up-made-good, founded in 1984 by a husband-and-wife team at Stanford University to link computers so they could chat online.
The frenetic pace of the Internet means Cisco is used to turning out its routers and switches quickly for a market in which computer crashes can be a fact of life.
Lucent, of Murray Hill, N.J., predates the founding of former parent AT&T Corp. more than a century ago. As Bell Labs, it was Ma Bell's right arm for most of its years.
Lucent has become more aggressive since its spinoff. Yet its focus has traditionally been on reliability rather than rushing new products out the door.
"Lucent has been pretty slow to market" with data equipment, said Gregory Geiling, an analyst at J.P. Morgan Securities Inc., which has "buy" ratings on Lucent and Cisco.
Where Cisco knows the Internet, Lucent knows phones. And not surprisingly, each says that its experience is what is needed to lure big customers in the IP market.
"We've spent decades building the world's most robust and reliable networks," said Bill O'Shea, president of Lucent's data networking systems group. "We know how this stuff works."
Cisco officials disagree. They say it's simpler for them to make phone equipment than for Lucent to build data-networking products, which are more sophisticated.
"It's an easier process to master," said Graeme Fraser, vice president of Cisco's Internet and service provider unit.
Lucent raised the stakes last week, agreeing to pay $1 billion for Yurie Systems Inc., which makes IP equipment.
The Yurie purchase came a week after Cisco said it would share technology with Lucent competitor Ciena Corp. Ciena's products let phone companies send more data over their fiber-optic networks.
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