In a series of fiber-optic and networking announcements this week Lucent Technologies has revealed a two-pronged business strategy, which calls for maintaining its edge in the telecommunications-equipment component market, while building up its business as a provider of end-to-end data and telecom packages.
Lucent announcements this week include: a US$350 million fiber-contract with former corporate parent AT&T's Submarine Systems Inc. subsidiary; expansion of fiber optic capacity at its Danish manufacturing subsidiary; and a plan to provide terabit level networking technology by 2000.
Lucent's "Terabit by 2000" initiative is an example of how the company is offering end-to-end data and voice systems in an effort to differentiate itself from competitors such as Northern Telecom Inc., according to company officials.
"We're offering products in solutions rather than in parts," says Robert Mohalley, North American region customer business management vice president responsible for profitability of optical fiber and cable products.
"We're solving a problem, not just selling a part," Mohalley said yesterday in a teleconference strategy briefing for media and analysts.
The Terabit by 2000 initiative is designed to assemble the components that would allow customers to run networks able to handle a trillion bits of information at once. Today's highest-capacity systems can switch up to 20G bits (a gigabit is a billion bits) per second, the equivalent of 200,000 simultaneous two-way voice conversations, noted Lucent officials.
Now, the Bell Labs unit of Lucent has an experimental switching architecture, based on current device technology and ATM (Asynchronous Transfer Mode) technology, which would make it possible to switch a terabit - or 10 million phone conversations - per second. Key components of this terabit network platform include: TrueWave Fiber, a singlemode fiber design for long-haul networks; and WDM, or Wavelength Division Multiplexing, designed to maximize bandwidth of existing fiber networks.
Assembling systems out of prebuilt components is a good idea, analysts say.
"Selling solutions and services is how Lucent can differentiate itself from companies that are selling similar components," says Bartholomew Stanco, vice president of networking technologies for Gartner Group. "But it's hard to turn a big ship around; I don't think you'll see services matching their components businesses before five years."
Meanwhile, Lucent will continue to churn out components and basic equipment for bandwidth-hungry carriers and Internet Service providers. These carriers are building out their infrastructure as demands on networks grow and telecom market reform leads the way to more and more competition.
This week, Lucent's Danish manufacturing facility, Lycom A/S, will announce expansion of fiber optic cable capacity, presaging an announcement later this year of a new long-term fiber-optic cabling plan, Mohalley said. The market for fiber-optics is growing, from a volume of 34,700 kilometers this year to 75,345 in 2002, Lucent officials note.
Though Lucent has been selling to competitors of its former parent, AT&T, the carrier is remaining loyal to Lucent, yesterday announcing a US$350 million contract for Lucent fiber optics and other technology.
Lucent's supplier agreements with AT&T's SSI unit include a volume purchasing commitment naming Lucent as a preferred supplier of fiber optics, digital transmission equipment, network management hardware and software, and microelectronics components.
Under the terms of the agreements, Lucent will supply communications equipment for SSI's recently awarded Atlantic Crossing (AC-1), a cable system to directly connect the U.S., Germany and the U.K.
Lucent, in Murray Hill, New Jersey, can be reached on the World Wide Web at http://www.lucent.com/.