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Wed, Jul 09, 2003 - Page 12 News List

Lucent plans network push

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Lucent Technologies Inc chief executive officer Patricia Russo is accelerating a push to manage customers' telecom networks as the company faces a fourth year of declining sales for equipment.

Russo said she wants to boost sales from providing services to telephone carriers, a business that could add a steadier source of revenue than sales of switches and routers.

Lucent, the largest US seller of telephone networking gear, has racked up losses of US$29 billion in the past three years amid a slump in demand. Russo is looking to revive the Murray Hill, New Jersey-based company much in the way Louis Gerstner transformed computer maker IBM Corp into the world's largest computer-services provider.

"I'm betting that we would get more business there than if we stayed in the model we've been in," Russo said in an interview.

Revenue from services constituted about 20 percent of Lucent's US$12.3 billion of total sales in fiscal year 2002. Russo said she wants to increase that ratio, though wouldn't be specific.

Lucent's annual revenue slumped 60 percent from 1999 through last year as total US capital spending by telephone companies slid 57 percent to US$50 billion.

Sales of services at Lucent fell, more than halving to US$2.69 billion. Russo estimates US carriers spend about US$40 billion a year paying other companies to help manage their networks.

To counter the slide, Russo in April hired John Meyer from Electronic Data Systems Corp, IBM's nearest competitor, to run the services operation and set up a new sales team. Russo, who was named chief executive in January of last year, said her vision for Lucent "has analogies to the IBM model, there's no question."

Russo gave Meyer 130 people to start. Meyer, formerly Electronic Data's president of information technology management services, said he is in the final stages of hiring a services-sales leader.

With Jeff Jaffe, president of advanced technology at Bell Laboratories, Lucent's research and development unit, Meyer began pitching clients within days of his start at Lucent. They visited 12 customers in his first two weeks.

Phone companies are "turning back to the people that sold them the equipment in the first place and saying, `Can you show me how to run these things better?' or in some cases, `Can you run them for me?'" Meyer said.

He said sales of services could eventually account for at least half of Lucent's revenue.

Shares of Lucent rose US$0.03 to US$2.03 at 1:18pm in NYSE composite trading. They are down from a high of US$64.69 in Dec. 1999.

Russo is looking for new sources of revenue in part because she sees few signs of demand for equipment picking up. Lucent has done almost as much cost cutting as it can. The company has sold businesses and whittled its workforce to 38,500 from more than 120,000 in Sept. 2000. Some analysts predicted last year that the company may be forced to file for bankruptcy protection if it couldn't stem losses.

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