Lucent Technologies

Lucent Technologies was an American multinational telecommunications equipment manufacturer created through the 1996 divestiture of AT&T Corporation's equipment businesses. The new company brought together Western Electric, AT&T Technologies operations and Bell Laboratories, giving it both a large installed base in carrier networks and one of the world's most prestigious industrial research organizations. AT&T separated the business partly so that competing telephone companies would be more willing to purchase its equipment from an independent supplier rather than from a direct telecommunications rival. Lucent supplied products and services across fixed-line, mobile, optical, data and voice communications. Its portfolio included telephone switching systems, optical transport equipment, wireless infrastructure, access systems, enterprise networking products, voicemail platforms and related software and professional services. Bell Labs provided scientific and engineering capabilities, patents and technical credibility, while Lucent Worldwide Services supported network deployment, integration and maintenance for major service providers. The company became one of the most celebrated technology stocks of the late 1990s. Its share price rose sharply after the initial public offering, and its market capitalization reached approximately $258 billion at the height of the telecommunications boom. Lucent expanded through acquisitions including Octel Communications, Livingston Enterprises and Ascend Communications. It also pursued consumer communications through a joint venture with Philips, although that venture failed to gain meaningful mobile-phone market share and was dissolved. Lucent's growth was followed by a severe reversal. At the end of 1999 and beginning of 2000, the company reported problems in its optical-networking business, missed market expectations and suffered a major loss of investor confidence. Subsequent disclosures concerning accounting errors and allegedly aggressive sales and financing practices intensified the crisis. Chief executive Richard McGinn resigned in 2000, and the company undertook extensive restructuring, layoffs, asset sales and spin-offs. Its consumer-products business went to VTech, its Business Systems division became Avaya, and its microelectronics division became Agere Systems. Patricia Russo became chief executive in 2002 and led a narrower company focused on carrier infrastructure, including switching, optical, data and wireless networking. Lucent also outsourced or transferred some manufacturing operations while concentrating more heavily on network development and services. Although the business remained an important telecommunications supplier, the loss of several growth businesses and the collapse of the telecom-equipment market weakened its competitive position. On December 1, 2006, Lucent was acquired by Alcatel and became part of Alcatel-Lucent. The combination created a major international telecommunications-equipment group, but later produced substantial restructuring costs and asset write-downs. Lucent therefore ceased to exist as an independent public company, while Bell Labs and portions of its technology, employees and product heritage continued within Alcatel-Lucent and, subsequently, Nokia after Nokia acquired Alcatel-Lucent.

Lucent Technologies began operations on September 30, 1996, when AT&T separated its equipment-manufacturing and research businesses. The transaction transferred Western Electric-related activities, AT&T Technologies operations and Bell Laboratories into an independent corporation. AT&T had a strategic reason for the separation: competing telecommunications carriers were more likely to buy equipment from an independent vendor than from AT&T itself. Bell Labs supplied the new company with research depth, patents and a globally recognized technical identity. Henry B. Schacht initially led Lucent as chairman and chief executive, while Richard McGinn served as president and chief operating officer. Carly Fiorina helped organize the launch and initial public offering and subsequently held senior responsibility for consumer products and the service-provider business. The brand name was derived from a Latin root associated with light. Its distinctive red Innovation Ring, created by Landor Associates, was intended to express continual reinvention and preserve an association with Bell Labs innovation. Lucent's early public-market performance was exceptional. During the late-1990s telecommunications boom, its share price rose from a split-adjusted spinoff level of approximately $7.56 to roughly $84, and its market capitalization reached about $258 billion. The company expanded its scope through acquisitions. Octel Communications strengthened voicemail and messaging; Livingston Enterprises added internet-access equipment and the RADIUS protocol; and Ascend Communications brought major data-networking capabilities. Lucent also entered consumer mobile communications through a joint venture with Philips. That venture failed to achieve its intended scale, gained only a small share of the handset market and was dissolved. The expansion proved difficult to sustain. At the beginning of 2000, Lucent announced that disruptions in optical networking and weaker operating results had caused it to miss expectations. The announcement ended a long run of quarterly results that had exceeded analyst forecasts and caused a dramatic market reaction. Later disclosures concerning accounting errors and the overstatement of quarterly revenue further damaged confidence. McGinn resigned as chief executive, Schacht returned temporarily to the leadership role, and chief financial officer Deborah Hopkins subsequently left. Regulatory scrutiny also led to a Securities and Exchange Commission enforcement matter and a fine concerning the company's cooperation in a fraud investigation. Lucent responded by narrowing its operations and reducing costs. It sold its consumer-products unit to VTech, spun its Business Systems division into Avaya and separated its microelectronics division as Agere Systems. Manufacturing was increasingly outsourced or reorganized; a supply arrangement with Celestica transferred selected North American manufacturing activities while allowing Lucent to concentrate on network-system development and services. These actions reduced the company's industrial breadth at the same time that the telecommunications-equipment market was contracting. Patricia Russo became permanent chairman and chief executive in January 2002. Under her leadership, Lucent remained active in telephone switching, optical networking, data networking and wireless infrastructure, but it was much smaller than at its peak. Employment fell from approximately 165,000 at the company's zenith to about 30,500. The loss of enterprise networking, wireless-handset and semiconductor activities limited Lucent's ability to participate in every major growth segment when the market began to recover. Lucent and Alcatel revisited combination discussions in 2001 and eventually reached a merger agreement announced in 2006. Alcatel completed the acquisition on December 1, 2006, forming Alcatel-Lucent. Russo became chief executive of the combined company and Serge Tchuruk became non-executive chairman. The merger did not produce all of the anticipated synergies and was followed by significant restructuring and asset write-downs. Lucent therefore ended as an independent brand and corporation, while Bell Labs and parts of its technology heritage continued within Alcatel-Lucent and later Nokia.

1. 2006Alcatel completes acquisition

   Lucent became part of Alcatel-Lucent on December 1.

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2. 2002Patricia Russo becomes chief executive

   Russo took permanent leadership as Lucent focused on a reduced carrier-networking portfolio.

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3. 2000Restructuring and disclosure crisis

   Lucent reported weaker results, disclosed accounting errors and began separating consumer, enterprise and semiconductor businesses.

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4. 1999Ascend Communications acquisition

   The acquisition broadened Lucent's data-communications and networking portfolio.

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5. 1997Octel and Livingston acquisitions

   Lucent expanded into voicemail, internet access and data networking through the acquisitions of Octel Communications and Livingston Enterprises.

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6. 1996Lucent is established through AT&T divestiture

   AT&T separated its equipment and research businesses, including Western Electric activities and Bell Labs, into Lucent Technologies.

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A research-led, full-service telecommunications equipment supplier for incumbent telephone companies, mobile operators and other network providers, differentiated by Bell Labs engineering, carrier-grade reliability and a broad network-infrastructure portfolio.

• Carrier switching systemsTelecommunications infrastructure

  Lucent supplied switching equipment used by telephone companies and other carriers to establish, route and manage voice services. These systems represented the company's inheritance from AT&T and Western Electric and remained a core part of its network-solutions business after the company exited several adjacent markets.

• Optical networking systemsOptical transport

  Optical networking was one of Lucent's principal strategic areas. The company developed systems for transporting large volumes of traffic over fiber networks and pursued acquisitions intended to strengthen its optical portfolio. The division was also central to the company's difficulties during the 2000 telecommunications downturn.

• Wireless network infrastructureMobile-network equipment

  Lucent provided infrastructure, access and switching products for cellular operators. Its wireless activities included network deployment and systems integration rather than only handset manufacturing. The company later transferred or outsourced selected manufacturing while retaining emphasis on network technology and carrier services.

• Octel voicemail systemsVoice messaging1997

  Octel's voicemail and messaging technology became part of Lucent after the 1997 acquisition of Octel Communications. It gave Lucent a leading position in business and carrier voice-messaging systems and made the Business Systems Group profitable at the time of the transaction.

• Livingston PortMaster and RADIUS productsInternet access networking1997

  Livingston Enterprises contributed PortMaster access products and expertise in the RADIUS protocol, which was widely used by dial-up internet service providers for authentication and access management. The business extended Lucent's presence beyond traditional voice networks.

• 1996Bell Labs Innovations launch positioning

  Global

  Lucent used the phrase “Bell Labs Innovations” in early corporate communications and launch materials to connect the new independent company with the prestige and research heritage of Bell Laboratories.

  Outcome. Helped establish the new brand's research-led identity.

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• 2006Agree to merger with AlcatelM&A

  Lucent needed greater scale after restructuring and the collapse of the telecommunications-equipment bubble.

  What changed. Alcatel acquired Lucent and combined the businesses as Alcatel-Lucent.

  Aftermath. Lucent ceased to operate as an independent public company; the combined group later underwent substantial restructuring and asset write-downs.

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• 2001Outsource selected manufacturing to CelesticaStrategy

  Lucent sought to reduce manufacturing intensity and focus resources on network-system development.

  What changed. Selected Oklahoma City and Columbus manufacturing assets were placed under a multiyear supply arrangement with Celestica.

  Aftermath. Celestica became a major electronics-manufacturing partner for Lucent's North American products.

  Cash received from Celestica. 570 million USD (2001)

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• 2000Separate consumer, enterprise and microelectronics businessesStrategy

  The telecommunications downturn and Lucent's accounting and operating problems forced the company to simplify its structure and raise cash.

  What changed. Lucent sold its consumer-products business to VTech, spun off Business Systems as Avaya and separated microelectronics as Agere Systems.

  Aftermath. Lucent became more concentrated on carrier infrastructure but lost several businesses that later represented important industry growth segments.

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• 1996Create an independent carrier-equipment companyStrategy

  AT&T's equipment operations had difficulty selling to competing carriers while remaining inside the telecommunications parent.

  What changed. AT&T divested the equipment businesses and Bell Labs into Lucent Technologies.

  Aftermath. Lucent gained independence, a major carrier customer base and Bell Labs research assets.

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• 2004Securities and Exchange Commission enforcement matterControversy

  The Securities and Exchange Commission charged Lucent and imposed a $25 million fine related to the company's lack of cooperation in a fraud investigation.

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• 2000Accounting and revenue-reporting controversyControversy

  Lucent disclosed a $125 million accounting error for the third quarter of 2000 and later acknowledged that revenue for its latest quarter had been overstated by nearly $700 million. The disclosures followed concerns about aggressive sales and customer-financing practices and contributed to the departure of senior executives and a severe loss of market confidence.

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• 2006Lucent is acquired by Alcatel

  Alcatel completed its acquisition of Lucent on December 1, creating Alcatel-Lucent.

  M&A
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• 2006Lucent agrees to merge with Alcatel

  Lucent and Alcatel announced a combination that created Alcatel-Lucent, ending Lucent's independent corporate existence.

  M&A
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• 2002Lucent spins off Agere Systems

  The company separated its microelectronics division into Agere Systems as part of a broader restructuring program.

  M&A
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• 2001Lucent and Alcatel merger talks collapse

  Negotiations failed after the companies disagreed over the composition of the combined board.

  M&A
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• 2000Lucent reports a major earnings shortfall

  Problems in optical networking and weaker results caused Lucent to miss expectations and triggered a sharp fall in its market value.

  OtherPricing
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• 2000Lucent acquires and later closes Chromatis

  Lucent announced the acquisition of Israeli optical-networking company Chromatis and shut the business the following year.

  M&AProduct generation
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• 2000Lucent spins off Avaya and Agere Systems

  The company separated its Business Systems division into Avaya and later spun off its microelectronics division as Agere Systems.

  Other
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• 2000Lucent reports a major quarterly shortfall

  The company announced that optical-networking problems and other difficulties had caused it to miss expectations, triggering a sharp fall in its market value.

  OtherProduct generation
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• 2000Lucent spins off Avaya

  Lucent separated its Business Systems arm into Avaya, an independent enterprise communications company.

  M&A
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• 1999Lucent acquires Ascend Communications

  The approximately $20 billion transaction expanded Lucent's data and communications-networking capabilities.

  M&A
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• 1998Lucent and Philips dissolve their consumer-communications venture

  The Philips Consumer Communications joint venture struggled in mobile phones and was dissolved after weak market performance and substantial losses.

  Other
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• 1998Philips Consumer Communications venture is dissolved

  A consumer wireless-handset joint venture between Lucent and Philips struggled with technology, distribution, and management problems and was ended after limited market penetration.

  M&AOther
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• 1997Lucent acquires Octel Communications

  The acquisition added a major voicemail and messaging business to Lucent's communications portfolio.

  M&A
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• 1997Lucent acquires Livingston Enterprises

  Lucent acquired Livingston, known for the RADIUS protocol and PortMaster access products used by internet service providers.

  M&A
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• 1996Lucent Technologies is spun off from AT&T

  AT&T separated its equipment businesses, including Western Electric and Bell Labs, into the newly independent Lucent Technologies.

  Other
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1. Lucent Technologies