Lucent looks to jump-start its corporate business

The networking equipment provider hopes to stimulate its corporate networking equipment business with new technology that competes with rivals Cisco Systems, Nortel Networks and others.

3 min read
Lucent Technologies hopes to jump-start its corporate networking equipment business with new technology that competes directly with rivals Cisco Systems, Nortel Networks and others.

Lucent, best known for its hardware for phone companies and Internet service providers, has struggled to gain a foothold in the corporate market dominated by established data networking equipment players such as 3Com and Cabletron Systems.

But next month, Lucent will ship a new high-speed routing switch that it hopes will propel sales and allow it to better compete with established networking companies as well as with start-ups such as Foundry Networks and Extreme Networks that sell similar equipment.

"Lucent has had products, but they have not executed very well in their positioning, marketing and sales," Infonetics Research analyst Mike McConnell said. "They're beginning to articulate how they're going to compete in this space. They're trying to come out with a cohesive story. And this [new product] is building it."

Last month, Lucent chief executive Richard McGinn admitted the firm's corporate networking sales have been disappointing, despite a push that includes acquisitions of several data networking companies, including Prominet and Xedia.

Lucent claims only 2 percent of the market for corporate network switches, selling $71 million worth of equipment in the third quarter, according to analyst firm International Data Corp.

Cisco, which makes Catalyst switches, leads the market with 49 percent market share and $1.9 billion in sales during the third quarter. 3Com is a distant second with 12 percent and $473 million in revenue, while Nortel garnered 10 percent, and Cabletron 6 percent in the third quarter.

Corporate networking equipment allows businesses to connect PCs and servers along a local network to share files and applications.

In addition to its networking equipment, Lucent's enterprise unit also features low-end PBX phone switches, an internal telephone system that connects a company's telephone extensions with an outside network.

Lucent's latest switching device, called the Cajun P880, supports so-called convergence networks that support voice, video and data on a single pipe, according to the company. The device also lets network administrators reserve network bandwidth to ensure that specific applications are available during high-traffic times, executives said.

"This product fits nicely with their portfolio," IDC analyst Esmeralda Silva said. "If you look at the platform people are asking for, it's big performance with gigabit Ethernet."

Nortel executives, who consider Cisco the company's top rival, scoffed at Lucent's latest effort. Nortel in June released a high-speed routing switch, called the Accelar 8100, aimed to connect PCs within an office to a network. In the first quarter of 2000, Nortel plans to release the Accelar 8600 routing device that connects the networks of a series of offices or buildings together.

"If you look at performance, we're still better than they are. They're playing catch-up. Just look at their market share," said Luc Roy, product marketing director for Nortel's enterprise networking systems.

Analysts believe Lucent can still do well in the corporate market, especially when the demand for Internet-based networks that can handle both voice and data increases.

"It's very difficult to get into the enterprise market if you're not already an incumbent vendor. Cisco, Nortel, 3Com and Cabletron all have an installed base," Silva said.

But Lucent should be able to leverage its traditional strengths, such as its call center equipment and professional services organization, to sell to the corporate market, she said.

"When voice and data come together, it's an opportunity for Lucent," Silva said. "They can have a complete solution, rather than just selling point products."

Infonetics Research's McConnell said Lucent's product announcement shows that the company is committed to the market. "They haven't made an announcement in a while," he said. "This market is moving really quickly and they need to keep innovating and come out with new products. They just haven't put the resources to put that message across to users."

In a recent survey of businesses, McConnell found that Lucent is barely on many a network administrator's radar screen.

When he asked them who they would buy their future networking equipment from, Lucent ranked 10th, behind market leaders Cisco, 3Com, Cabletron and Nortel, as well as Intel and Hewlett-Packard.

"The market is not conceiving Lucent as a player," McConnell said. "They have a lot of work to do."