Troubled Lucent must change or die

A series of body blows to hardware giant Lucent have left the US company struggling to survive in its current form.

Significant changes at Lucent would send shock waves through enterprise networks, with the firm claiming that more than 75 per cent of the world's top companies rely on its technology.

A high-profile merger with Alcatel collapsed last week after Lucent's board began to suspect that the deal was a prelude to a take over. Sources said that Lucent chairman Henry Schacht demanded chairmanship of the merged company, and Alcatel refused.

This followed news that another of Lucent's customers was on the brink of liquidation, owing it millions from an equipment financing deal. Australian telco One.Tel accepted a $300m finance deal from Lucent as it sought to build a $1.1bn mobile network.

Another customer, Winstar, filed for bankruptcy protection in April, and then launched a $10bn lawsuit against Lucent claiming it had broken an agreement to lend it more money. It already owed Lucent $700m.

Mark Blowers, senior researcher at analyst the Butler Group, said that customers with significant investments in Lucent technologies were facing uncertainty as the company's rivals begin to circle over its service contracts.

He explained that, if Lucent does cease to exist in its current form, network managers should vet newcomers carefully. "Haul them in to make sure the skills and long-term commitment are there," he warned.

Blowers slammed Schacht for his stubbornness over the position of chairman, saying: "It can't afford that kind of pride. The board must act in the best interests of its shareholders. Lucent will struggle to survive in its current form, and will need to seek another form of partnership.

"It could trade its way out if it wins contracts to build third-generation networks, but it won't survive many more of these financing deals."