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Lucent wants data traffic

Lucent fires the latest in a series of salvos at data networking firms today with new products targeted at service providers.

Telecommunications giant Lucent Technologies fired the latest in a series of salvos at established data networking companies today with the introduction of new products targeted at service providers.

The service sector is a sought-after business for the likes of Cisco Systems, Ascend Communications, and 3Com.

Lucent has pursued a data networking strategy aggressively ever since it was freed from the clutches of its former parent, AT&T. The company has been dipping into its war chest to gobble up three firms in deals totaling nearly $2 billion in recent months.

With more than $25 billion in annual revenue, Lucent's recent data focus has struck fear in the hearts of networking executives from Silicon Valley to New England.

"We feel passionately that the game has moved onto our turf," said Carly Fiorina, president of Lucent's global service provider business. "The game is about more than individual products."

Amid an ongoing convergence between the equipment that carries voice traffic and devices that traditionally have served data-based needs, there is a debate about who is better prepared to capitalize: Will telecommunications providers or the "datacentric" companies do better?

"It makes it all very interesting with the concept of converging worlds where you have the top leaders in their own respective markets, but suddenly those mutually exclusive markets become one market and things get very territorial," said Jeremy Duke, analyst with market researcher In-Stat.

Both sides of the aisle--voice and data companies--also are seeing a convergence on a single standard, IP (Internet protocol), as a means for transmitting a variety of traffic, whether it is "packetized" voice signals, streams of video content, or electronic mail.

The move ups the ante between Lucent and Cisco in particular, especially in light of last week's acknowledgment by Cisco CEO John Chambers that a partnership between the two giants was out of the question, given Lucent's recent data moves.

Northern Telecom also lurks north of the American border as a sizable adversary for established data firms. Chambers left open the possibility of a partnership with the Canadian telecom equipment firm last week, and rumors of a possible acquisition of Bay by Nortel have resurfaced in recent weeks.

What may raise the most eyebrows this week is the news that Lucent's development of a terabit-speed routing device intended for the back end of service provider networks--a technology that will pit the firm against start-ups such as Juniper Networks and NetCore Systems.

"The market for these terabit-per-second IP routers is a big one," noted David Passmore, president of technology consultants NetReference.

The new PacketStar IP switch, due to ship in the fourth quarter, is the work of the company's respected Bell Labs research arm, according to a Lucent spokesman.

MCI Communications will test the new Lucent technology in trials next month, according to executives.

Lucent executives claim the equipment can transfer data at 32 million packets per second in its initial phase, with terabit speeds on the horizon--rates that dwarf the performance of traditional routing devices, which have long been Cisco's cash cow.

Feeling the heat last year, Cisco upgraded its aging routing line of products with a new 12000 model that brought gigabit speeds to the technology. Analysts say work is now under way to retain the company's franchise with new terabit-speed technology that could blunt the encroachment of products like the PacketStar and various entries from start-ups.

But Cisco also can rely on its well-known propensity to snap up some firm to supply what its customers need. "Cisco can always just buy somebody," Passmore said. "When you've got the market capitalization it has, it's awful easy to whip out the checkbook."

Cisco, the largest data networking player, reported annual revenues of $6.4 billion for its 1997 fiscal year and enjoys a market capitalization of nearly $80 billion.

To round out its IP-based lineup, Lucent also announced a new PathStar Access Server intended to offer network service providers a way to implement combined voice and data options for customers. An accompanying PacketStar Gateway allows voice traffic to move across networks originally intended for data. No pricing information on the products was available.