The rise and demise of Lucent Technologies

Lazonick, William and March, Edward (2010): The rise and demise of Lucent Technologies.

Abstract

We analyze the rise and demise of Lucent Technologies from the time that it was spun off from AT&T in April 1996 to its merger with Alcatel in December 2006. The analysis, contained in the three sections that form the body of this paper, considers three questions concerning Lucent’s performance over the decade of its existence. 1.How was Lucent, with over $20 billion in sales in 1995 as a division of AT&T, able to almost double its size by achieving a compound growth rate of over 17 percent per year from 1995 to 1999? 2.What was the relationship between Lucent’s growth strategy during the Internet boom and the company’s financial difficulties in the Internet crash of 2001-2003 when the Lucent was on the brink of bankruptcy? 3.After extensive restructuring during the telecommunications industry downturn of 2001-2003, why was Lucent unable to re-emerge as an innovative competitor in the communications equipment industry when the industry recovered?

• Item Type: MPRA Paper
• Language: English
• Keywords: Communications equipment; innovation; global competition; financialization
• Subjects: L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L25 - Firm Performance: Size, Diversification, and Scope; D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior: Theory; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O32 - Management of Technological Innovation and R&D; L - Industrial Organization > L6 - Industry Studies: Manufacturing > L63 - Microelectronics ; Computers ; Communications Equipment

References

Arnst, Catherine, 2000, “Lucent: Clean break, clean slate?” BusinessWeek, November 6.

Baker, William O., Ross, Ian M., John Mayo, and Daniel Stanzione, 2000, “Bell Labs Innovation in Recent Decades,” Bell Labs Technical Journal, January-March: 3-16.

Barbash, Fred, 2000, “When firms can’t keep up with change,” Washington Post, October 15.

Blumenstein, Rebecca, 2001, “Overbuilt web: How the fiber barons plunged the nation into a telecom glut,” Wall Street Journal, June 18.

Business Wire, 1997a, “WinStar – ‘The new phone company’ – debuts in Chicago,” Business Wire, April 3.

Business Wire, 1997b, “Lucent Technologies appoints chief operating officers, organizes business around fastest growth opportunities,” Business Wire, October 23.

Cambridge Telecom Report, 1999, “Lucent Technologies adds new capabilities to breakthrough DSL access concentrator, Stinger,” Cambridge Telecom Report. December 20.

Carpenter, Marie, William Lazonick, and Mary O’Sullivan. 2003. “The Stock Market and Innovative Capability in the New Economy: The Optical Networking Industry.” Industrial and Corporate Change, 12, 5: 963–1034.

Egbert, Dan, 2000, “Lucent preparing battleground for optical business fight,” Associated Press Newswires, May 24.

Endlich, Lisa, 2004, Optical Illusions: Lucent and the Crash of Telecom, Simon & Schuster.

Fiber Optic News, 2002, “Alcatel Leads Siemens, Lucent in DSL Market,” Fiber Optic News, March 25.

Fisher, Lawrence, 2000, “Lucent to spin off slower-growing units,” New York Times, March 2, 200.

Glimstedt, Henrik, Donald Bratt, and Magnus P. Karlsson, “The Decision to Make or Buy a Critical Technology: Semiconductors at Ericsson, 1980-2010,” Industrial and Corporate Change, 19, 2.

Glimstedt, Henrik, William Lazonick, and Hao Xie, 2006, “Evolution and Allocation of Stock Options: Adapting US-Style Compensation to the Swedish Business Model,” European Management Review, 3, 3: 1-21.

Ide, M., 1998, Japanese Corporate Finance and International Competition, Macmillan.

Jander, Mary, 2000a, “Lucent Shares Hammered by $125M Goof,” Light Reading, November 21.

Jander, Mary, 2000b, “Lucent, Chromatis, and & Ignitus: A True Tale?”, Light Reading, November 22.

Jander, Mary, 2000c, “Tales of Lucent: Readers Respond,” Light Reading, November 29.

Jander, Mary, 2001a, “SEC Knocking on Lucent’s Door,” Light Reading, February 9.

Jander, Mary, 2001b, “Lucent Ditches Chromatis,” Light Reading, August 28.

Johnson, Linda, 2000a, “Lucent says growth to slow in coming quarters; shares fall 16 percent,” Associated Press Newswires, July 20.

Johnson, Tom, 2000b, “Lucent target of lawsuits over 4th-quarter earnings,” Star-Ledger, November 29. Ladendorf, Kirk, “Lucent plans spinoff of $4 billion unit,” Austin American-Statesman, July 21, 2000.

Lazonick, William, 1999, “The Japanese Economy and Corporate Reform: What Path to Sustainable Prosperity?,” Industrial and Corporate Change, 8, 4: 607-33.

Lazonick, William, Michael Fiddy, and Steven Quimby, 2002, “‘Grow Your Own’ in the New Economy?: Skill-Formation Challenges in the New England Optical Networking Industry,” in R. Forrant and J. Pyle, eds., Globalization, Universities, and Sustainable Human Development, Elgar: 233-59.

Lazonick, William, and Steven Quimby. 2007. “Transitions of a Displaced High-Tech Labor Force,” in Tom Juravich, ed., The Future of Work in Massachusetts, University of Massachusetts Press: 111–134.

Levine, Bernard, 2000, “Lucent Technologies to spin off parts,” Electronic News, July 24.

Lewis, Anthony. 1956. “AT&T Settles Antitrust Case; Shares Patents.” New York Times, January 25.

Loomis, Carol J. 2003. “The whistleblower and the CEO.” Fortune. July 7.

Lucent Technologies, 1999, “Lucent Technologies Launches Breakthrough DSL Platform to Deliver High Quality Voice, Data, and Video Services” Lucent Technologies Press Release, September 7.

Mehta, Stephanie N., 1999, “Lucent set to offer phone firms array of DSL varieties,” Wall Street Journal, September 7.

O’Sullivan, Mary, 2004, “What Drove the U.S. Stock Market in the Last Century?” INSEAD Working Paper, INSEAD.

PR Newswire, 2003, “Lucent Technologies reaches agreement to settle shareowner class action,” PR Newswire, March 28.

Schiesel, Seth, 2000, “How Lucent stumbled: Research surpasses marketing,” New York Times, October 20.

Snyder, Beth, 1996, “The chosen one: Bell consortium opts for Alcatel ADSL system,” Telephony Online, October 14.

Sorkin, Andrew Ross, and Simon Romero, 2001, “Alcatel and Lucent call off negotiations toward a merger,” New York Times, May 30.

Tampa Tribune, 2000, “Lucent Technology stocks soar after spinoff plans made public,” Tampa Tribune, March 2.

Taylor, Colleen, 2007, “LSI Logic, Agere close merger deal, consider job cuts,” Electronic News, April 9.

Tenorio, Vyvyan, 2002a, “Lucent unloads majority of startup portfolio to Coller,” The Daily Deal, January 4.

Tenorio, Vyvyan, 2002b, “New details of Lucent VC sale,” The Daily Deal, January 11.

US Department of Commerce, Economics and Statistics Administration, 1994-2006, Annual Capital Expenditures, US Census Bureau, available at http://www.census.gov/econ/aces/historic_releases_ace.html.

US Federal Communications Commission, 2000, “Trends in Telephone Services”, December, available at http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/IAD/trend200.pdf.

US Federal Communications Commission, 2007, “Trends in Telephone Services,” February 2, available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-270407A1.pdf.

US Federal Communications Commission, “High Speed Services for Internet Access.; Status as of June 30, 2007,” March 2008, available at http://fjallfoss.fcc.gov/edocs_public/attachmatch/DOC-280906A1.pdf.

United States Patent and Trademark Office, 2009, “Patent Full-Text and Full-Page Image Databases,” (searching in field name ‘Description/Specification’ for ‘optic$’), available at http://patft.uspto.gov/.

Vascellaro, Jessica E., 2007, “Is high-speed Internet growth sowing?” Wall Street Journal, Aug 9.

Young, Shawn, 2005, “Why the glut in fiber lines remains huge,” Wall Street Journal, May 12.

Young, Shawn, and Peter Grant, 2003, “Bell tolls: How phone firms lost to cable in consumer broadband battle,” Wall Street Journal, Mar 13.

Wall Street Journal, 1996, “AT&T, Northern Telecom find role in Sprint project,” Wall Street Journal, February 2.

Wallis-Jones, Seth, 2009, “Avaya doubles up to win with US$915-mil. bid for Nortel enterprise unit,” HIS Global Insight Daily Analysis, September 15.

Wilson, Carol, 2005, “DSL port sales explode”, Primedia Insight, August 9.