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Lucent shrinks in Cisco's networking shadow

The company's chief executive says it's been a laggard in the market for corporate networking equipment, but sees improvement going forward.

MURRAY HILL, New Jersey--Lucent Technologies remains a laggard in the lucrative market for corporate networking equipment, according to the company's chief executive.

The firm, primarily known as a provider of hardware for phone companies and Internet service providers (ISPs), has nevertheless made a concerted effort to crack the corporate networking market dominated by rival Cisco Systems, as well as 3Com and Cabletron Systems, among others.

CEO Richard McGinn's candid comment today is significant as Lucent has periodically bought data networking companies to complete its enterprise portfolio. Those acquisitions, however--among them Prominet and Xedia--haven't yet paid the dividends Lucent expected.

"We are an afterthought in enterprise data," McGinn told a throng of reporters at the company's annual press day, noting that the company collects only a "few hundred million dollars" from its business.

Enterprise networking involves equipment that allows corporations to connect PCs and server systems together to communicate. The enterprise corporate niche has increasingly fallen under the shadow of the Net as firms alter strategies--and equipment purchases--to create internal networks based on Net technology.

Analysts say the firm hasn't put much effort in the corporate market. Lucent could suffer as many other firms have already staked a claim in the space, they add.

"I haven't seen anything innovative out of Lucent for years. They don't see the enterprise as being strategic," Camden & Associates analyst Alan Zeichick said. "How much value can they add with 3Com, Cisco and Nortel in that space?"

Lucent's enterprise unit includes its corporate networking equipment, low-end "PBX" phone switches, wiring systems and a variety of networking software. While the software segment is booming, according to the company, the PBX business and wiring systems business are slow.

Making progress
Yet Bill O'Shea, chief executive of the company's enterprise networks business, said the firm is making "very good progress" in positioning itself for the future. He said the group plans to repackage its enterprise hardware and software as "bundles" to move away from selling single products.

"Part of the challenge in the enterprise business is the number of moving parts," O'Shea said.

But McGinn said the firm will not consider buying more networking companies to catch up in the market; rather the firm will look toward going where the technology is heading and focus on how it can be the leader going forward.

"We're looking at where the business is going in the future; we are not trying to out-Cisco Cisco," McGinn said.

Though Lucent trails Cisco in corporate networking, the company has a wide lead in providing fiber-optic based equipment for service providers, considered one of the hottest markets in the industry. Lucent's service provider business accounted for $24 billion in revenue for its latest fiscal year.

By looking ahead, McGinn said Lucent could rely on its large stable of ISP customers which, he said, will play a more important role as technology providers and custodians of future corporate networks.

Separately, Lucent executives said the firm is in the process of selling its sales group that markets communications services to small businesses. It canceled plans to sell the division earlier this year, but another prospective buyer has come to the fore, according to McGinn.

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