Lucent Dims Softswitch as Red Ink Flows

Still struggling for a foothold on telecom's slippery slope, Lucent (LU) must turn its back on some promising paths to the future.

The sales-starved telecom equipment maker is preparing to close down its advanced phone-switching development, say people familiar with the plans. The move comes as Lucent and its rivals struggle with heavy losses brought on by falling sales and costs that remain massive despite repeated cutbacks.

Lucent is shutting down most of its softswitch program, a move that could affect more than 1,000 jobs, these people say. The softswitch is a line of products that held great potential for network upgrades but ultimately delivered very limited commercial success. Analysts and Lucent insiders say the company's optical networking group is also likely to be trimmed if not entirely dismantled, as demand for futuristic fiber optic gear has all but vanished.

A Lucent spokeswoman said the company is reviewing its product portfolio, but she declined to comment specifically on the softswitch and optical units. Analysts and one softswitch customer say that given the dire state of the industry and Lucent's need to cut its losses, it would come as little surprise if the company were to bail on the effort. Lucent fell 2 cents to 77 cents Thursday.

No New Switches

Welcome to the new networking reality, where telcos are saying no to new gear, say industry wags. Old phone technologies are being nursed along, and new solutions are largely going unbought.

"Given the state of the market and the predictions for no immediate improvement, it's not hard to understand why there's no technology advancement right now," says Sam Greenholtz, an analyst with the telecom research and consulting firm Communications Industry Research. "Customers are only adding to existing systems, and hardly anyone is doing a lot of planning for big new systems."