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Lucent Technologies Inc.

FOUNDED: Lucent was founded in 1995 and made fully independent of AT&T on September 30, 1996

Contact Information:

HEADQUARTERS: 600 Mountain Ave.
Murray Hill, NJ 07974-0636
PHONE: (908)582-8500
FAX: (908)508-2576
TOLL FREE: (888)458-2368
EMAIL: webmaster@lucent.com
URL: http://www.lucent.com

OVERVIEW

Lucent Technologies manufactures telecommunications equipment and also conducts research and development for new and or improved telecommunications products. The company consists of four main divisions, including: Bell Labs, providing breakthrough research and development support to Lucent Technologies; Systems for Network Operators, with design, manufacturing and support networking systems, and software for communications service providers and wireless operators; Microelectronics Group, which designs, develops, and manufactures integrated circuits, power systems, and optoelectronic components for use in the communications and computing industries; and Business Communications Systems, responsible for designing, manufacturing, selling, and servicing advance voice, data, and multimedia communications solutions for worldwide businesses and the U.S. government.

COMPANY FINANCES

By 1997 Lucent stock prices had grown from the initial value of $27 per share to about $55. The stock rose sharply late in 1997 and on April 1, 1998, it split twofor-one after reaching $140. In May 1998, it was trading in the low 70s.

At the end of the company's second quarter of fiscal 1998 (March 31, 1998), Lucent reported its net income had more than doubled to $180 million over the same quarter of the previous year. According to its 1997 annual report, Lucent's revenues rose steadily in each quarter after its initial public offering, and it achieved record total revenues in its first fiscal year as an independent company.

In 1997 total sales reached $26.36 billion. Of that total, 59 percent ($15.61 billion) came from systems for network operators, 24 percent ($6.41 billion) from business communications systems, 11 percent ($2.76 billion) from microelectronics, 4 percent (__BODY__.01 billion) from consumer products, and the remaining 2 percent, or $567 million, from other systems and products.

ANALYSTS' OPINIONS

Lucent will be in position by October 1998 to merge with another giant in the technology arena, according to financial reporter Tiernan Ray of SmartMoney Interactive in a May 1998 story. Ray foresees one big purchase or multiple purchases. Ascend Communications, Nokia, Bay Networks, and P-Com would make good strategic choices for a company interested in maintaining dominance in wireless communications and networking technologies, according to Ray.

"Whatever the nature of Lucent's acquisitions, most observers seem to agree that the company's path will bring it more and more into direct competition with Cisco," Ray predicted, citing that Lucent may be the best example of the Silicon Valley business model because "management is running the company more and more as an entrepreneurial shop."

According to another analysis appearing on Knight-Ridder/Tribune Business News, "There is a certain unpredictability to the equipment business, where sales ebb and flow." Bear Stearns & Co. expects that Lucent's markets will have grown 10 percent a year from $285 billion in 1995 to $380 billion by the end of 1998.

"The phone market is going to be expanding. There is natural growth and now new competitors," said Alan Sulkin, a former AT&T employee who runs TeqConsult in Hackensack, New Jersey. "The need for new equipment is on the order of $14 billion . . . I think the other Lucent strength is they are not just selling product, they are selling solutions and knowledge of applications, in which all their major competitors . . . are playing catch-up."

HISTORY

Lucent was formed in 1995 in the wake of AT&T's restructuring. AT&T sold 17.6 percent of Lucent in an April 10, 1996 initial public offering. The $3 billion was the largest initial public offering in U.S. history. The company shifted the remaining 82.4 percent of Lucent to AT&T shareholders on September 30, 1996. A share of Lucent was traded for every three AT&T shares owned for a total of 525 million shares of Lucent stock distributed to AT&T shareholders.

The company is the corporate descendant of AT&T's Western Electric manufacturing division that AT&T bought in 1881. Elisha Gray founded the company in 1869, close to the time Alexander Graham Bell patented the first telephone. Also under the Lucent umbrella is Bell Laboratories in Murray Hill, New Jersey, formed in 1925, and credited with the invention of the transistor and the communications satellite, the laser, the cellular phone, and electronic telephone switching. From the time it was founded until the time it was incorporated into Lucent, Bell Laboratories averaged one patent a day. Lucent, however, averaged three patents a day between March and September 1996, and has managed to maintain a high rate of development since its founding.

Lucent designs, builds, and delivers public and private networks, communications systems and software, consumer and business telephone systems, and microelectronic components. Under the guidelines of the spin-off/breakup, AT&T kept its services business, including long-distance, wireless, Internet access, satellite television, and a budding local phone service, while Lucent emerged as a new business, positioned to succeed from the start.

In 1996, Lucent Technologies reported a 10-percent increase in revenues between the first quarter of 1995 and the first quarter of 1996, from $4.2 to $4.6 billion. This was attributed to increased sales of systems for network operators and microelectronic products. Those revenues increased in all segments, except consumer products. Further, Lucent reported a $444-million increase in corporate costs of goods sold. In 1997, two years into independent operation, Lucent had revenues of $21.4 billion, a workforce of more than 125,000 employees around the world, and a position as the third-largest private employer in New Jersey.

At the same time, the company experienced losses because of new-company start-up costs and expenses. These included building new information systems and the costs associated with introducing the new company name and logo. In 1997, Lucent faced additional challenges as a result of integrating and consolidating Philips Electronics NV into the company. Ultimately, the company earned more than __BODY__.0 billion in profits in 1996 and __BODY__.1 billion in 1997. At the end of the second quarter of 1998, Lucent reported that revenues were $6.2 million, an increase of 19.6 percent over the same quarter in 1997.

STRATEGY

Lucent is attempting to position itself to take advantage of its various leading positions in subsectors of the telecommunications market. It is tapping into new technologies including the wireless phone market, video-conferencing, and Internet telephony. In 1997, executives predicted the annual growth for Lucent Technologies should range between 10 and 15 percent. The cellular segment, for example, is expected to increase from 100 million subscribers to 1.4 billion by 2010.

Lucent is interested in growth in international, as well as domestic, markets. It has positioned itself as a leader in rapidly changing technologies by offering new products frequently and by responding quickly to evolving industry standards.

CURRENT TRENDS

In the next few years, Lucent is prepared to acquire and invest in new businesses, partner with existing businesses, deliver new technologies, close or consolidate some facilities, reduce its workforce, or withdraw from markets in order to maintain its competitive edge, according to its 1997 annual report.

In some cases, partnerships may involve competitors. By partnering with a competitor to develop new technology, Lucent has the advantage of sharing the expense, as well as the potential for failure. In June 1998, Lucent announced such an alliance with Motorola in order to develop next-generation digital signal processor (DSP) technology and to cross-license existing DSP architectures. As part of the alliance, Lucent and Motorola will create a joint design center, named StarCore, in the Atlanta area. They hope to have their first products available by mid-1999.

PRODUCTS

Lucent makes equipment for public and business communications systems and is a supplier of systems and software to the world's largest networks, according to the company. It manufactures microelectronic components for communication systems, and computer manufacturers. In conjunction with several strategic partners, Lucent also produces messaging equipment, personal communications products, and switching equipment used in asynchronous transfer mode technology (ATM). One of the company's new areas of research and development is Digital Subscriber Line (DSL) high-speed modem technologies, putting it into direct competition with Cisco Systems.

CORPORATE CITIZENSHIP

Lucent gives back to the community through its Lu-cent Technologies Foundation, which supports philanthropic initiatives that advance education, addresses the needs of communities where employees live and work, and encourages employee volunteerism and giving. In 1997, the Foundation assisted Australian students living in remote outback areas, coordinated company volunteers working for Atlanta's Habitat for Humanity, and awarded $3 million to education for manufacturing workers. In addition, Lucent employees have established and raised more than $500,000 for the Blind Foundation for India.

GLOBAL PRESENCE

According to one report, Lucent leads the world market for network systems with a customer base that includes AT&T, the regional Bell telephone companies, and countless phone carriers from Saudi Arabia to India and Indonesia. The company has strategic relationships or joint ventures—such as one in Poland with Telekomunikacja Polska S.A.—in more than 12 nations, with a presence in every nation. According to the company's annual report, it has 1.4 million customers in 94 countries. Among them are Brazil, China, Egypt, France, Hong Kong, India, and Indonesia. Lucent has offices or distributors in more than 90 countries, including Bell Laboratories facilities in 17 of those.

EMPLOYMENT

At its start, the company inherited more than 100,000 employees. Soon after the initial public offering, an estimated 22,000 jobs were eliminated, according to a February 1997 article in Baltimore Business Journal. There had been expectations the company needed to consolidate even more to survive. By September 30, 1997, Lucent's workforce reflected a reduction of another 18,000 employees, part of a companywide restructuring.

SOURCES OF INFORMATION

Bibliography

Ey, Craig S. "Lucent Enjoys Growth Spurt." Baltimore Business Journal, 14 February 1997.

"Lucent and Motorola Join Forces to Develop Advanced DSP Technology." May 1998. Available at http://www.starcore-dsp.com/.

"Lucent 1Q Revs Up 10%, Micro Unit 26%." Electronic News, 20 May 1996.

Lucent Technologies: First Annual Report 1996. Murray Hill, NJ: Lucent Technologies, 1996.

1997 Lucent Annual Report. 17 May 1998. Available at http://www.lucent.com/annual97/.

Perone, Joseph R. "New Jersey-Based Lucent Sets Goal of Double-Digit Growth." Knight-Ridder/Tribune Business News, 20 February 1997.

Rosenbush, Steven A. "Lucent Prepares to Complete Its Separation from AT&T." Knight-Ridder/Tribune Business News, 15 September 1996.

"Who's On Lucent's Shopping List?" SmartMoney Interactive, 8 May 1998. Available at http://www.smartmoney.com/smt/story=19980508intro.

For an annual report:

on the Internet at: http://www.lucent.com/annual97 or write: Lu-cent Technologies, c/o The Bank of New York, PO Box 11009, Church St. Sta., New York, NY 10286-1009

For additional industry research:

Investigate companies by their Standard Industrial Classification Codes, also known as SICs. Lucent's primary SICs are:

3613 Switchgear and Switchboard Apparatus

3661 Telephone & Telegraph Apparatus

3669 Communications Equipment, NEC

8731 Commercial Physical Research