LAS VEGAS-Like fresh water on a dry rock, some good news for Lucent Technologies Inc. But how good?
The $5 billion deal last week with Verizon Wireless provided a shot in the arm for a company whose repeated stumbles have made industry watchers wonder if the telecom equipment giant was not going to have a Humpty-Dumpty fall.
While not completely ruling it out, some optimism seems to break in the company’s favor.
The agreement with the largest carrier in the United States allows Lucent to supply Verizon’s third-generation high-speed mobile network infrastructure in a three-year time frame for $5 billion.
According to both companies, Lucent will supply the equipment to deploy the first phase of 3G, known as 1xRTT, in its premier coast-to-coast network in the second half of this year, which promises to be the first commercial launch this year in the United States.
One key element of the agreement is to evolve existing networks from voice capacity to increased data-transmission speed by about 10 times.
This news also comes in the context of Lucent’s efforts to cut $2 billion in expenses, lay off 10,000 workers and provide guarantee for its recent $4.5 billion loan.
“This agreement reaffirms a longstanding relationship with Lucent and together we are laying the groundwork to rapidly roll out 3G products and services for our customers later this year,” said Richard Lynch, executive vice president and technical officer of Verizon Wireless.
Cynthia Christy, Lucent’s chief operating officer for global wireless, described the deal as a major player’s endorsement of her company as a supplier of products that make Lucent competitive.
“It’s a vote for Lucent as a major technology player,” she said. “It leverages our assets, which include IP core and high-end solutions for bold customer care and what it means to be successful.”
She said the project will be relatively phased to include the base station, CDMA 1x, the core networks and movement from circuit switch to packet, which will put Verizon in good stead for services and applications leading to a total solution. “3G is a marathon,” emphasized Christy, “not a sprint.”
Lucent outsmarted such other players as Motorola Inc., Nokia Corp. and Nortel Networks for the contract, which has driven some speculation that Lucent may have offered much lower prices, a trend that has proved to be economically counterproductive in the past. Adam Guy, a senior analyst with Strategis Group, said while the agreement looks good on the surface, the bare bones have to be proven in the implementation. Verizon does not outsource the management of its networks to Lucent in this contract. Guy said the success of the agreement is not guaranteed by the dollar amount, of which the full financing details are not known.
With dynamic changes taking place in the wireless industry, especially with technological evolutions and companies’ changing strategies, it was hard to cast any deals in iron, given the collapse of a number of deals in the past, Guy said.
“But Lucent needed this kind of agreement,” he said.
While Lucent continues to face legal suits and tries to maneuver as a premier equipment supplier amid stock dives and management miscues, some industry watchers think that the 3G infrastructure environment will provide cheer for the ailing giant.
MobileStream, an analyst firm based in the United Kingdom, recently sang the praise of the Murray Hill, N.J.-based company, saying that it understood the CDMA infrastructure environment and has ramped up a great deal of strategic contracts around the world. The company has secured trials and deployment contracts in Europe and Asia with Telefonica, KPN in Japan, SK Telecom of Korea, mobile Internet trials with Cegetel in France, a variety of agreements with NTT, and GPRS agreements with T- Mobil in Germany and in Ireland.
Christy said the main strategy to revamp the company lies in the shift from radio and base stations to customer-care and overall solutions, a trend that seems to be emerging in both the vendor and operator space as witnessed by the keynote comments by Motorola’s Chief Executive Officer Christopher Galvin and Nokia Corp’s Jorma Ollila during the CTIA trade show here last week.
