Lucent (LU) is about to test whether one extreme will repair the damages of another.
Hard Times
Take the soft switch. Little more than a series of software applications that control calls, the soft switch is considered the Holy Grail of voice switching because it represents the only bridge between Internet-based advances and the old phone system. As the acknowledged steppingstone in network evolution, it promises to keep selling even as telcos large and small pinch pennies. Network gearmakers like Lucent, Nortel (NT) and Cisco (CSCO) have poured ample time and resources into soft switch development in recent years.| Shrinkage Lucent shedding revenue, workers in recent quarters |
| *Revenue figures are quarterly. **Sept. '01 and Dec. '01 numbers are estimates. Source: Lucent. |
Cutting
As part of the profitability push, Lucent is seeking to cut as many as 20,000 more jobs; that will put its employment at about 60,000 workers, less than half of the year-ago level. Lucent is also preparing a list of unprofitable customers, countries, products and research centers that it plans to phase out as early as the end of the year. Among the items at the top of Lucent's hit list are overseas sales operations and research-and-development centers. Last week, Lucent announced it was planning to fire 550 people in France and shutter its R&D there. The gearmaker's advanced voice-switching division plans to close two of its seven research centers worldwide. Lucent also stopped overseas development of its soft switch and doesn't plan to resume the effort until 2003. And in areas that have been deemed unprofitable, including Taiwan, Southeast Asia and parts of Eastern Europe, Lucent is preparing to scale back significant sales and research efforts for the time being. On a recent conference call with Lucent managers, David Geary, the vice president and general manager of convergence solutions, outlined a series of sweeping consolidations ahead for his division. A manager on the conference call asked Geary if Lucent realized that by cutting its losses and getting out of certain countries now, the company risked never being able to cash in on future sales in those countries. Geary said that was an easy decision to make because Lucent's 10-year investment in these countries has yet to pay off. "These countries have not been delivering good business for years," said Geary. "The hope was to make it up in volume, establish a footprint, get a good return on that. But it hasn't been proven. You can continue to chase that dream, but right now we don't have that option." And you can bet Lucent's options will be even fewer in light of its new direction.>To order reprints of this article, click here: ReprintsTheStreet Premium Services For Personal Service: 877-471-2967
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