Lucent looks likely to raise $6.5 billion by tomorrow’s deadline.
US network equipment firm Lucent Technologies needs to raise $6.5 billion before this Thursday, to extend its credit line as part of a major restructuring announced last month. Despite the problems the company has been facing recently, it looks likely to achieve this target. According to the WSJ, a consortium of major banks has all-but agreed to support the plan. Raising the money will obviously be good for Lucent. However, a cash injection will not be enough to end Lucent’s problems.
Every player in network infrastructure – even the mighty Cisco – is suffering from the economic slowdown in the US. Demand is much lower than firms had expected, so everyone is failing to meet their aggressive revenue and profits growth targets. In such a market, the prospects are obviously less than ideal.
However, not everyone is seeing revenues fall by 26%, as Lucent did in Q4 2000 compared with Q4 1999. The reasons for the extreme nature of Lucent’s decline are more strategic. The company, perhaps due to its history as a subsidiary of telecoms behemoth AT&T, has just not been as innovative at marketing its kit as its rivals. Its Bell Labs subsidiary is one of the world’s best research facilities, but this is useless unless you can sell products.
Still, another announcement released yesterday implies Lucent might be moving in the right direction. It has launched a new product called the WaveStar Wireless Network Solution, which it is marketing as the best way for wireless providers to cut operating costs and downtime. The product is effectively its existing optical solution repackaged for wireless, as fixed-line telcos and ISPs slow spending.
This is exactly the kind of thing Lucent needs to do: creating products which there is plenty of demand for, without significant R&D costs. Of course, the individual product will have little effect on Lucent’s bottom line. But if it is a sign of things to come, then the $6.5 billion may not go to waste after all.
