If Friday's Lucent ( LU) meeting offered up an opportunity to celebrate, Wall Street didn't seem to be in a partying mood. It's no exaggeration to say that the company made it to its latest annual strategy session in New York only by taking drastic action. Now, having slashed two-thirds of its workforce and cut products by the dozen, Lucent is finally in a position to talk in terms of businesses and margins rather than headcount and liquidity. But with the hard sledding past, the New Jersey phone gear maker must find new ways to win over competitors. And on that count Lucent came up a bit short at the meeting, held Friday morning in New York. Bold predictions were few and far between, consisting mostly of a pledge to spend three to four years modernizing core switching gear and yet another vow to sell more consulting services. Some observers found little compelling evidence that Lucent has enough fuel in the tank. "A year ago they were nearly bankrupt financially and strategically," said one Wall Street analyst who attended the show but asked not to be identified. "It looks today like they may have conquered at least one of those problems." On Friday Lucent dropped a penny to $2.20.
Nortel to get a lead in the softswitch field.
Step Slow?Among the high points of the morning presentation were Lucent's comments about working with its customers to migrate its "Class 5" core phone switch to a more Internet-capable technology known as the softswitch. But some analysts, including Legg Mason's Timm Bechter, say while the move is sound, it is late and highlights the catch-up game Lucent must play with rival Nortel ( NT). Lucent's core switching gear dominates the world's phone networks, but the company had a series of blunders that allowed
With nearly every phone company looking for a cheap way to move their Lucent gear toward a next-generation softswitch, the market was basically Lucent's to lose. Nortel has far from perfected the technology, but it has made a significant jump. Bechter said it was good to hear Lucent was on the case and working with its customers to develop softswitches. "They have to do it if they want to keep their installed base," says Bechter, who has a neutral rating on Lucent and a buy on Nortel.
Another topic Lucent discussed with analysts that raised some eyebrows was the new role of its hallowed Bell Labs unit. According to executives, the formerly blue-sky-focused scientists are now talking with customers and product-development people to help speed innovation to the market. Legg Mason's Bechter was a bit surprised to hear this hadn't been done much sooner and sees it as a sign of the times. "I think they did it out of necessity," says Bechter.