As Restrictions End -- What's on deck for Lucent?
Kimberly Caisse
Computer Reseller News 09/28/98
Murray Hill, N.J. -- It is the most anticipated mega-acquisition in
the networking industry's history, and it has not even happened-yet.
As data networking companies, such as Cisco Systems Inc., gain ground
in markets traditionally owned by telecommunications suppliers and in
the wake of Northern Telecom Ltd.'s purchase of Bay Networks Inc.,
pundits speculated about which large data networking company Lucent
Technologies will acquire after Oct. 1. That is when financial
restrictions associated with its 1996 divestiture from AT&T Corp. will
end.
With $26.4 billion in revenue last fiscal year and $1 billion in
cash, Lucent can make substantial acquisitions, analysts said. In fact, as an independent company, Lucent already acquired 13 companies, six of which were small data networking vendors. The largest grab, Yurie Systems Inc., Landover, Md., cost about $1 billion.
But after Oct. 1, Lucent can leverage what is called "pooling of
interests" to go after even larger game and enhance its position in data networking.
Lucent would not comment.
The significance of Lucent becoming a major player in data networking
is not lost on VARs.
Plenty of resellers would consider teaming with Lucent, but today's
networking VARs can only focus on a limited number of suppliers, said
John Ford, manager of software and services at Midwest Systems Inc., a
Minneapolis VAR.
Convincing VARs to sign on with Lucent might be tough, Ford said. "We
can only focus on a couple of partners," which are 3Com Corp. and Cisco, he said.
On the other hand, Mike Wertheimer, president of Solunet Inc., Palm
Bay, Fla., anticipates Lucent's stronger presence in data networking.
Solunet became a Lucent VAR when it acquired Livingston Enterprises, a
remote access hardware vendor, earlier this year for about $610 million in stock. Data networking "is a natural fit [for Lucent.] They have a great opportunity. I just don't want them to study this to death," he said.
So which networking company will Lucent pick? Most industry observers
point to Ascend Communications Inc., Alameda, Calif.
Ascend's Cascade switches would be its most valuable asset to Lucent.
But Ascend would not help Lucent build its channel because Ascend has
relationships with only five VARs, the largest of which is Solunet, said analysts. This leads industry observers to favor a purchase of 3Com, Santa Clara, Calif.
3Com "would make a very nice strategic fit for Lucent" because it has
enterprise data networking products and a strong indirect channel, said Dave Passmore, research director at NetReference Inc., Sterling, Va. In addition, there would be little product overlap from a 3Com purchase, he said.
Another possibility is a combination of 3Com and Ascend, which would
give Lucent a strong product set with which to compete against Cisco.
Additional rumors include a purchase of Motorola Inc., Schaumburg,
Ill., or Finnish wireless maker Nokia Group. Sun Microsystems Inc.,
Mountain View, Calif., also is mentioned as a possible partner. But Sun "is going too far afield of Lucent's core business [and] wouldn't help them compete with Cisco and Nortel," Passmore said.
Lucent also might consider buying a services or systems integration
company, industry observers said. Lucent needs a strong team of
engineers to design networks and consult for its service providers and
large enterprise customers, said Ruth Chatterton, a consultant at
Telechoice Inc., Owasso, Okla. The most efficient "way to do this is to buy an existing company," she said.
MARGIE SEMILOF contributed to this story.
Copyright 1998 CMP Publications Inc.
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