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Lucent Technologies Inc. - Communications Equipment - Category Main Page
908-582-8500
600
Mountain Ave.
Murray Hill, NJ 07974
www.lucent.com
Sales
$8.5
billion
Business Description
Lucent Technologies Inc. designs and delivers the systems, services and
software that drive next-generation communications networks. Backed by Bell
Labs research and development, we rely on our strengths in mobility,
optical, software, data and voice networking technologies, as well as
services, to create new revenue-generating opportunities for our customers,
while enabling them to quickly deploy and better manage their networks. Our
customer base includes communications service providers, governments and
enterprises worldwide.
We
are organized around two distinct customer segments: Integrated Network
Solutions, focusing on the needs of wireline service providers, and
Mobility, focusing on the needs of wireless service providers. We have
consolidated sales, product development, product management and general
profit and loss responsibilities within each of these two segment
organizations. Financial information about each of these segments is set
forth in Note 14 to our consolidated financial statements and our
Management’s Discussion and Analysis of Financial Condition and Results of
Operations contained in this report.
Our segments are supported by a number of central organizations, including
LWS, Supply Chain Networks (“SCN”), Bell Labs and the Corporate Centers
(e.g. finance, human resources, information systems, law, etc.). LWS
provides the services that are sold to customers through the two segment
organizations. SCN manages the materials and activities necessary to produce
and deliver products and services to our customers. Our Corporate Centers
provide administrative support to both segments.
INTEGRATED NETWORK SOLUTIONS
INS focuses on wireline service providers and offers a broad range of voice
networking, data and network management and optical networking products. Our
offerings include services provided by LWS and may include products,
software and services provided through original equipment manufacturers and
our co-marketing and strategic alliances with other businesses. Our voice
networking, data and network management and optical products are an integral
part of our customers’ networks.
INS’s revenues during fiscal 2003 were approximately $4.2 billion, of which
52% were from customers in the United States. Our revenues are primarily
from large, established service providers. Sales to our five largest
customers accounted for approximately 41% of our total revenues during
fiscal 2003. We sell most of our products and services through our direct
sales force, with individual teams that support all significant customers,
and, to a much lesser extent, through third-party distributors. We are
actively working to enhance our relationships with third party distributors
and increase our indirect sales capabilities. As of September 30, 2003, INS
had approximately 7,000 employees primarily engaged in product development
and sales and marketing activities.
We believe that over time, voice traffic will migrate from existing
circuit-switched infrastructure to a packet infrastructure primarily driven
by new packet-based end-user devices. These devices, when connected to the
packet-switched infrastructure, will offer new kinds of multi-media and
voice services. However, we do not believe that wireline service providers
will undertake a massive replacement of circuit switches in the near term.
They are more likely to pursue new opportunities by overlaying features and
functions onto their existing networks.
Our primary focus is on addressing opportunities with our service provider
customers, many of which are transitioning from legacy to next-generation
architectures. For example, customers are exploring ways to migrate their
networks from circuit to packet switching, from SONET/SDH optical voice
networks to data-enabled Multiservice Provisioning Platforms, from
asynchronous transfer mode (“ATM”) and Internet Protocol (“IP”) transport to
Multi-Protocol Label Switched (“MPLS”), from narrowband access to broadband
access, and from multiple network operations support systems to integrated
network operating systems. We believe that one of the key priorities for
service providers is continuing to generate revenues from their existing
networks while managing the transition to new architectures.
In voice networking, we are working closely with our customers to help them
evolve their 5ESS® circuit-switched platforms to increase capacity, lower
cost of operations and accelerate new feature introductions. We have
launched an IP Centrex solution that adds interfaces on the 5ESS circuit
switch to connect packet-based end-user devices for voice traffic. This
allows service providers to serve new types of terminals and offer new
services with a small additional investment, while significantly reducing
operating expenses.
In 2003, we launched the 5E-XCTM high-capacity switch to direct traffic to
and from multiple wireless and long- distance carrier markets. New 5E-XC
packet and optical interface units will support new IP endpoints, such as
personal computers, IP phones and new IP-enabled mobile phones and handheld
devices.
We have developed a single softswitch platform supporting both wireline and
wireless applications. We have deployed this platform in customers’ labs,
field trials, and commercial service. We have recently increased our
investment in wireline softswitch applications to tailor them for carriers
that are building new networks, and for carriers that are evolving existing
networks to softswitch control.
Driven by service provider interest in offering new revenue-generating
services to subscribers, we have assembled a set of offers that enable
service providers to evolve their circuit-switched and data networks to
Voice-over-IP (“VoIP”) networks. These offers comprise applications such as
messaging and Web portal software, intelligent call control systems, such as
the Lucent softswitch and 5E-XC switch, transport systems, such as AnyMedia®
access systems and APX® universal gateways, and Navis® network management
software.
In the packet-switched network core, we are committed to helping our
customers migrate to MPLS networks. MPLS is a protocol or procedure for
regulating the transmission of data through a network using multiple types
of traffic, such as frame relay, ATM and IP.
In May 2003, we announced a partnership with Juniper Networks to deliver
unified solutions, made up of Lucent and Juniper systems and software, to
help customers migrate data networks to MPLS and to deliver
revenue-generating frame relay, ATM, IP, virtual private network (“VPN”),
digital subscriber line (“DSL”) and optical services. Components of these
offers include the Lucent GX550® multiservice core switch, the CBX500®
multiservice switch, the PSAXTM multimedia gateway, Lucent Navis® software
and Juniper routers.
In our Data and Network Management line of products, which includes Stinger®
DSLAM, AnyMedia Access Systems, and Universal Gateway products, we continue
to invest to meet customer commitments, and we have a clear focus on
reducing the manufacturing costs of these platforms.
In optical networking, our primary focus and near-term investment planning
is on metro optical products, which support local metropolitan area networks
and for which there is a strong market demand. The market for core optical
long-haul equipment has slowed because of significant overbuilding in the
past three years.
Another area where we continue to make significant investments is network
management software. Our Navis® iOperations software portfolio is focused on
simplifying network management for our customers, reducing costs, improving
reliability and helping them accelerate the time to market for voice and
data services. These areas are critical to the business success of our
customers, and we believe there will be an increasingly strong demand for
these types of management solutions. Many service providers have deployed
our software products.
We offer products within the following categories.
Voice Networking Products
Primarily used for voice communications, circuit switching is a networking
technology that uses switches to transmit, or “switch,” communications from
one location to another within the network. Circuit switching has been used
in telephone networks for decades. In a traditional circuit-switched
telephone call, the telephone network creates dedicated connections so that
the person placing the call can communicate with the person receiving the
call. When the call is placed, the network determines a path for the call,
and all communications during that call are transmitted over that path. The
telephone line and other network resources are then dedicated to that
particular call and cannot be used for any other purpose, including any
other call.
Packet switching is a more recent technology that has historically been used
for data communications. The Internet uses IP switching, a specific type of
packet switching, to connect the end user to the servers where the Web pages
reside. In packet-switched networks, information is divided into small
segments called packets in IP networks, cells in ATM networks and frames in
frame-relay networks. Packets are then sent independently, possibly over
different paths, through the network from the originating end of the
transmission to the destination. At each step along the way, the network can
determine the “next step” that a particular packet should take. As the
packets arrive at the destination, they are reassembled into the original
information.
Packet switching has an advantage over circuit switching in that it allows
information streams to more efficiently share network resources, because a
path is not dedicated to each information stream, as in circuit switching.
However, packet switching can have lower transmission quality than circuit
switching because packets may get delayed or lost in transit. New protocols,
or procedures, between packet switches allow the network to maintain quality
transmission of information by tagging each information packet with a
description of the type and importance of its content. MPLS is such a
protocol for regulating the transmission of data through a packet network.
MPLS allows multiple types of traffic (data, voice and video) to cross a
packet-switched network without loss of quality.
Data and Network Management Products
Data and network management products provide a means of connecting the end
user to the rest of the network. Our data and network management product
line includes access through twisted copper wires, which is the wiring
commonly used in local telephone networks. Voice traffic has traditionally
been, and continues to be, connected to circuit switches through
circuit-switched access products. This allows one voice call per pair of
copper wires. More recent access technologies, such as DSL, allow faster
transmission of data, multiple voice connections and even video streams over
one pair of copper wires. INS has three families of products, two fully
specialized at providing DSL service with high speeds at low cost and the
other aimed at providing a flexible mix between traditional voice access and
DSL access. Other access technologies allow packet-and circuit-switched
networks to communicate with each other. An example is our Universal Gateway
line of products, which allow end users to dial over a circuit-switched
connection (traditional phone call) and then interface with a
packet-switched network, such as the Internet.
Our Network Operations Software solutions manage network performance for
wireline and wireless service providers, as well as their customers. Our
software allows providers to maximize their existing network operations
while permitting easy integration of new services and technologies as they
grow. We recently announced three new software solutions designed to allow
service providers to simplify the management of their networks and deliver
high-margin services, such as DSL service, quickly to their customers.
Optical Networking Products
Optical networking products include laser-based transmission systems that
transport information between and among switches and other network
components by release of light particles. Optical networking is made
possible by photonics, a technology that uses light particles, or photons,
to transport information over glass fibers in optical fiber cables. These
systems include core backbone high-capacity systems, the central portion of
network equipment, as well as lower-capacity metropolitan systems (local
networks).
Core optical networking systems expand and speed optical signals over fiber
cable for the ”core,” or central portion, of a service provider’s network
and allow these customers to increase the amount of traffic transmitted over
their fiber optic networks. The core network equipment is responsible for
moving voice, data and video traffic from origin to destination and
connecting radio base stations to the public voice and data networks.
Metro optical networking systems, another group of optical networking
products, are designed to aggregate and increase the use of fiber optic
systems for both voice and data traffic for local carriers or networks
located in metropolitan areas. This family of optical networking products
gives service providers fast, efficient information transport over fiber
optic lines.
MOBILITY SOLUTIONS
Mobility’s revenues during fiscal 2003 were approximately $4.0 billion.
Although products and services are provided to wireless service providers on
a worldwide basis, approximately 67% of Mobility’s fiscal 2003 revenues were
related to U.S. customers, of which 90% were concentrated with four large
U.S. service providers. We primarily sell to customers through our direct
sales force. As of September 30, 2003, Mobility had approximately 6,000
full-time employees engaged mainly in product development and sales and
marketing activities.
Mobility is focused on providing spread-spectrum solutions, both CDMA and
UMTS, which includes WCDMA, to wireless service providers. We are also
working on creating relationships with other equipment vendors to help us
offer best-in-class, end-to-end solutions and products. Where Mobility feels
it cannot develop best-in-class products in house, we look to partner with
companies that can supply products which will enhance the value proposition
we offer to our customers.
Our primary focus is on two technologies, CDMA and UMTS. However, we
continue to meet ongoing customer commitments for other technologies such as
Time Division Multiple Access (“TDMA”) and Global Systems for Mobile
Communications (“GSM”). The most important products in Mobility’s CDMA and
UMTS portfolios are developed internally, including radio access products,
circuit and packet core backbone networks, and network management,
application and service delivery systems. We also tap into INS’s strengths
in voice networking, data and network management and optical networking, and
we leverage the expertise of LWS.
We believe our strength and track record in spread-spectrum technologies has
uniquely positioned us for the global migration of our customers and
potential customers to 3G wireless networks. Our emphasis is on providing
the equipment and services that our customers need to evolve from their
current second generation (“2G” and “2.5G”) technology to the 3G
spread-spectrum technologies of CDMA2000 and UMTS.
The International Telecommunications Union, an international standards body
that operates as part of the United Nations, has been instrumental in
promulgating a vision of 3G that embraces a wide variety of spread-spectrum
technologies, technologies we have helped develop. We continue to be the
global leader in CDMA spread-spectrum networks, with more than 90,000 base
stations providing commercial service around the world. More than 50,000 of
those base stations provide 3G services for our customers today. We have
built 27 3G networks in 14 countries, equal to 43% of the 63 3G commercial
networks deployed. We also have ongoing UMTS customer trials with Telefonica
Spain, T-Mobile Germany and AT&T Wireless.
We have already brought to market spread-spectrum CDMA2000 networks in North
America, South America, China, India, Asia, Eastern Europe and Russia, and
we continue to make progress in penetrating the European and U.S. markets
with UMTS.
Based on the existing 3G migration plans from leading service providers
around the world, we expect that the great majority of future 3G mobile
users will access voice and high-speed data services through a CDMA2000 or
UMTS network. However, we cannot be certain that the spread-spectrum
technologies we are focused on will become the dominant standards for 3G
wireless networks. Demand for enterprise mobile data services is a major
driver behind 3G CDMA2000 and UMTS spending. New CDMA opportunities are less
frequent now, but we believe the market is sustainable, with successful
deployments of CDMA2000 in Korea, new networks in China and with Reliance
and Tata in India, and the launch of 3G1X CDMA in Eastern Europe and Russia.
Sprint and Verizon have launched our CDMA upgrades in North America. The
UMTS market also continues to gain momentum, with Hutchison commercial
launches in the U.K., Italy, Sweden and Australia. However price and
availability of devices remain challenging.
Some of our competitors continue to invest heavily in 3G alternatives in the
United States, and these alternatives continue to pressure our products. We
regard these alternative technologies as complementary to 3G; for example,
we are developing offerings that integrate 3G wide-area cellular with Wi-Fi
(wireless fidelity) for seamless secure roaming service. Some of our
competitors invested heavily in GSM and the future evolution of TDMA-based
technology to 2.5G (GPRS) and EDGE, a technology path in which we have
decided not to invest. These competitors have developed products to help
their GSM service provider customers migrate to 3G through technology
swapouts, rather than deploy new 3G networks. Two of the major service
providers in the United States have chosen this path. However, they continue
to plan for UMTS. We believe that EDGE will have a limited impact on the
value of UMTS, as spread-spectrum will provide superior performance both
technically and economically.
The industry forecasts for investment in 3G networks over the next three
years continue to vary widely. Financial and market conditions have driven
some service providers to delay their 3G deployments or abandon their plans
to deploy 3G. Operators are under pressure to achieve a positive cash-flow
position, which has increased competitive pricing and slowed investment.
We believe that service providers will begin investing in 3G networks as
their enterprise or business customers demand more mobile high-speed data
services. However, the demand for these services has not been sufficient to
compel service providers to make the required network investments. We
believe that wireless operators are aligning with our strategy to offer such
services initially to their business customers.
Our strategy continues to evolve beyond just a focus on high-speed data for
enterprises to include other opportunities that will allow us to leverage
the unique capabilities of spread-spectrum. We are actively positioning 3G
to address public-sector applications such as homeland security, public
safety, and government field operations. We are also developing solutions
that take advantage of 3G’s spectral efficiency which enable operators to
offer high volume, highly economical voice services. All of our solutions
are developed with a phased approach to the market, ensuring that we and the
mobile operator are focused on meeting the needs of end users as each
segment of the market develops.
We also continue to use primary market research to anticipate rather than
react to changes in the marketplace. Understanding the needs of our
customers and of end users allows us to differentiate ourselves in the
marketplace. We are increasing our understanding of our customer needs by
meeting with our customers more frequently and by establishing the Lucent
Demand Creation program. Through this deep customer understanding, we are
enhancing our ability to improve the profitability and efficiency of
operator networks by creating bundled products and services that can be
delivered as condensed business solutions. Integral to each solution, are
operator value propositions and flexible business models that qualitatively
and quantitatively demonstrate how operators can succeed best with us.
In order to expand our abilities to deliver end-to-end solutions to the
marketplace, we are selectively using third-parties for integration in the
enterprise environment. We will also continue to use partners with the best
end-user customer relationships as advocates for our solutions, stimulating
demand for services based on our offerings. For example, we have entered
into a reseller agreement and joint development agreement with Cisco in
order to integrate our own products and those of other vendors into the
end-to-end network solutions for our customers.
We offer products within the following categories.
Base Station Products
Base stations provide the radio links that transmit and receive wireless
subscriber calls and manage handoffs as customers move from cell to cell (a
cell is the area in which calls are handled by a particular base station).
Each radio base station covers a specific geographic area and has the
capacity to handle a certain amount of subscriber traffic. Typically, base
station equipment represents a significant portion of capital equipment cost
for a mobile operator.
The Flexent® OneBTS® base station is the newest member of our base station
family. It supports CDMA and UMTS technologies and will be our primary
platform for UMTS network deployments. The Flexent® OneBTS® base station
addresses the form, fit and function of future assemblies in a modular
fashion, so current investment is not likely to be lost as the cell evolves
to include expanded capacity in wireless voice and/or data transmissions.
Our family of Flexent® base station products supports virtually all major
radio access technologies.
Core Network Equipment
Core network equipment is responsible for connecting radio base stations to
the public voice and data networks. The primary element of the core network
for voice traffic is the mobile switching center (“MSC”). MSCs transfer
calls within the wireless network and interface to the public switched
telephone networks. The majority of these voice and packet data core network
products are provided by the INS segment.
Our 5ESS®-2000 switch has advanced switching, signaling and administrative
capabilities to deliver standard MSC functionality cost effectively. It is a
multipurpose, flexible modular platform capable of supporting both wireline
and wireless telecommunications applications. For our existing wireless
customers, we expect to continue to support the 5ESS-based MSC and provide a
smooth transition to the new Softswitch-based technology.
Our Softswitch-based 3G MSC provides integrated voice and data services that
use open application programming interfaces (applications for which the code
is published), enabling providers to create new, innovative services for the
mobile Internet.
Network Management Products
Operations and maintenance centers, which are essentially software systems,
allow service providers to provision, diagnose and administer their wireless
networks. Our Mobility segment will utilize our Navis® network operations
platforms as well as third-party systems to provide these products,
depending on the customer environment.
Applications and Service Delivery Products
The MiLifeTM applications platforms allow a wireless service provider to
easily introduce personalized mobile services. These platforms are used to
support mobile applications and services developed by us and by third
parties.
LUCENT WORLDWIDE SERVICES (LWS)
Even with the telecommunications market as challenging as it is, services
remain an opportunity for near-term revenue potential. We believe our
customers spend about $30 billion annually on services performed themselves
or by third parties. LWS is looking to leverage its core competencies,
strengthen its position in network optimization and multivendor network
integration, and expand into new areas such as managed services and
outsourcing.
LWS’s revenues during fiscal 2003 were approximately $1.8 billion, of which
65% was generated in support of INS customers and 35% in support of Mobility
customers. LWS personnel are organized and deployed on a regional basis. Our
U.S. services revenues represented about 55% of our total services revenues
during fiscal 2003. As of September 30, 2003, we had approximately 11,000
employees dedicated to professional services, deployment services, and
operational and maintenance services.
We believe services will differentiate us in the marketplace, based on our
excellent customer service, multivendor capabilities and Bell Labs
innovations. We have one of our industry’s largest groups of skilled
technicians, consultants, engineers and installers serving our top
customers. We offer multitechnology and multivendor services solutions
focused on customer problems in the following areas:
• Professional Services: These services help our customers identify network
areas where they can capitalize on high-margin opportunities, apply proven
tools and techniques to optimize performance and reduce operating expenses,
and plan evolution to protect their network investment and increase profits.
Our enhanced engineering services help our customers determine the best
configuration for maximizing traffic capacity and for achieving other
operational efficiencies. These services also provide our customers with “in
service” upgrades to help them migrate to new technologies. Our enhanced
technical services help carriers maintain a high-performing network by
identifying and correcting network performance issues, balancing traffic
loads and integrating new multivendor equipment and software into a live
system. We often help our customers improve their network quality by
troubleshooting, by reporting and resolving problems and by providing
on-the-job training to their staff. Professional Services revenues accounted
for approximately 20% of fiscal 2003 LWS revenues.
• Deployment Services: These services help our customers bring their
equipment online in an efficient manner and allow them to begin generating
revenues more quickly. Our equipment and field engineering services provide
analysis, identification and documentation of detailed hardware and software
specifications for new multivendor networking equipment to help ensure
smooth deployments. We build and expand wireline and wireless networks
globally and provide on-site configuration, testing and network connectivity
of the equipment following installation. We also can perform a complete
inventory, inspection, assembly, configuration and testing of network
equipment at one of our staging facilities prior to deployment in order to
deliver a complete ready-for-installation system at a customer site.
Deployment Services revenues accounted for approximately 40% of fiscal 2003
LWS revenues.
• Maintenance Services: These services help our customers maximize the
performance of their multivendor networks and maintain network reliability
and availability to ensure quality of service. We have the capabilities to
provide technical support either remotely via phone or modem for rapid
response, diagnosis and resolution or through on-site technical specialists
supplementing the service provider’s staff. Maintenance Services revenues
accounted for approximately 40% of fiscal 2003 LWS revenues.
We also provide services that help our customers manage and focus their
business on their core competencies by outsourcing to Lucent such network
functions as operations and maintenance and such other functions as planning
and design. They can rely on network management services provided through
our interconnected Global Network Operations Centers in the United States,
Europe and Asia. We often refer to these services as managed services.
We are focused on areas that customers tell us matter most to them in
today’s industry downturn. These areas include revenue recovery, network
performance and optimization, inventory management, network security and
technology migration. We also perform work for our customers on multivendor
networks. Key to helping our customers in all these areas is the expertise
of our R&D unit, Bell Labs. Based on Bell Labs innovations, we develop tools
that our engineers use to deliver our services, combining expert skills,
models and methodologies. This not only differentiates our services, but
also solidifies our relationships with key customers.
COMPETITION
The global telecommunications networking industry is highly competitive. Our
current principal competitors include Alcatel, Ciena Corporation, Cisco
Systems, Inc., LM Ericsson Telephone Company, Fujitsu Limited, Huawei
Technologies, Motorola Inc., NEC Corporation, Nokia Corporation, Nortel
Networks Corporation, Samsung Networks Inc. and Siemens AG. Some of our
competitors, such as Alcatel and Nortel, compete across many of our product
lines, while others compete in a smaller subset of our products.
Communications Equipment Companies in the Directory
Alcatel
Avaya
Lucent Technologies
Ericsson
Harris Corp.
Marconi
Nortel Networks
Siemens
Tellabs
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