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Commentary: Lucent must act decisively--and soon

Lucent Technologies' earnings warning shows that its troubles in adjusting to next-generation, optical and packet networks will continue to erode its market position unless it takes decisive steps soon.

    By Bob Hafner, Gartner Analyst

    Lucent Technologies' earnings warning shows that the company's troubles in adjusting to next-generation, optical and packet networks will continue to erode its market position unless it takes decisive steps soon.

    Lucent attributed the shortfall to:

    • Lower-than-expected revenue and profits from optical networking products

    • Credit concerns in the service provider market

    • Larger-than-expected decline in sales of circuit-switched products

    See news story:
    Lucent support of start-ups could point to problems

    Lucent has struggled for some time with many of the troubles underlying its earnings warning. Lucent has suffered because of its late entry into the optical networking market, and the shift from circuit-switched to packet-switched voice technology has slowed sales. Those troubles will continue in the near term as Lucent restructures to address them.

    At the beginning of October 2000, Lucent spun off its enterprise networking business, now called Avaya; however, Gartner remains skeptical about its growth prospects. Although the move to packet voice, which has enabled voice and data convergence, requires a strong presence in data networking as well, Avaya does not have great visibility in that area. Finally, Lucent was slow to make the leap to next-generation networks. As a result, the company lost mind share and market share.

    For now, Lucent remains a stable supplier. However, its position in the market has continued to weaken. To reverse that trend, Lucent will have to review its strategy. Unless Lucent takes clear steps to address its problems by fourth quarter, 2001, its market position could become irrecoverable. These steps include shortening time to market for new products, improving the performance of the sales force, and winning mind share and market share from Nortel Networks and Cisco Systems."

    (For related commentary on the ROI for unified messaging, see TechRepublic.com--free registration required.)

    Entire contents, Copyright © 2000 Gartner Group, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.