Lucent snags Baby Bell contract

The equipment maker announces that it will be supplying Verizon Communications to expand the company's optical network.

2 min read
Lucent Technologies announced Monday that it will supply equipment to Verizon Communications to expand the company's optical network.

Verizon will buy equipment, software, and services from Lucent to help build a network that will link New York City with London, Paris, Amsterdam, Brussels, Frankfurt and Milan, which will start operating by the second quarter of this year. Another network, which connects New York with Hawaii, Hong Kong, Tokyo and Sydney is already functioning and will become an additional part of the new network.

News of an optical-related equipment win comes at a good time for Lucent, according to analysts, since the company is widely regarded as being behind in the optical equipment market, losing contracts to the likes of competitors Nortel Networks and Ciena, among others.

"It's a nice win," said Charles Disansa, an analyst at Gerard Klauer Mattison. "It gets them back in the optical business."

The companies did not specify how much the deal is worth, but Verizon has said in the past that it plans to spend about $1 billion over five years on the network that will link large businesses in key financial centers around the world. The company estimates that U.S. businesses spend about $140 billion a year on telecom services.

Lucent has experienced a drubbing on the stock market over the past year, mainly caused by a string of earnings missteps. The company's stock trades at around $15 compared with its 52-week high of $75.37.

Verizon plans to expand the network to include other links to business and financial centers like Geneva, Zurich, Madrid, Singapore, Buenos Aires, Caracas and Mexico City.

Separately, Lucent's credit rating was cut by Standard & Poor's and Moody's Investors Service as a result of its current financial performance.

S&P cut its rating on Lucent's corporate debt two steps to ''BBB-'' from ''BBB+.'' Moody's downgraded Lucent's to ''BAA3'' from ''BAA1." Both ratings are a notch just above junk bond status.

Moody's mentioned in a report that the downgrade "reflect(s) the significant operational difficulties at the company" and added that the rating outlook for the future is negative. The credit watcher also added that it expects some benefits from the company's previously announced restructuring plan and the spinoff of some of its business.