Once Strong, Lucent Now Trails Rivals

Cisco, Nortel dominate healthy network market

At a time when its competitors are racking up impressive gains, onetime networking wonder Lucent Technologies Inc. [NYSE:LU] has suffered management shake-ups, unstable stock prices and lower-than-expected revenue.

Last week, the president of Lucent's optical networks division and the CEO of its service provider networks group both left the company. Murray Hill, N.J.-based Lucent has announced that it won't fill the former position.

Meanwhile, rival Cisco Systems Inc. [NASDAQ:CSCO] last week reported that net income for its fourth quarter ended July 29 was up 69% from the same quarter a year earlier, and Nortel Networks Corp. [NYSE:NT] has been making deals with companies to provide telecommunications support in foreign markets.

For the past month, Lucent's stock price has been bouncing between $40 and $60 per share - far from the $84 per share it hit in December.

Jim Slaby, an analyst at Giga Information Group Inc. in Cambridge, Mass., says he has been expecting some turmoil within Lucent's management ranks.

"Lucent looked promising a couple of years ago, and now it's facing its first financial troubles," he says.

Competitors like San Jose-based Cisco and Brampton, Ontario-based Nortel have pulled ahead of Lucent in market share, and Lucent has failed to mount an effective marketing offensive to keep up, Slaby says.

Lucent's attempts at innovative networking products have not been well received by the market, and the company hasn't been as successful in absorbing new technology from start-up companies as Cisco and Nortel have, says Nikos Theodosopoulos, managing director at UBS Warburg in New York.

"Nortel made a bold move into optical and high-speed optical, and they've timed it perfectly because that has been where we've seen market spending," says David Toung, a senior analyst at Argus Research Corp. in New York.

Cisco dominates the high-end corporate market, which is helping it to create inroads to the service provider market, according to Theodosopoulos.

Copyright © 2000 IDG Communications, Inc.

Shop Tech Products at Amazon