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History of Lucent Technologies

One of the primary reasons AT&T; chose to spin off its equipment manufacturing business was to permit it to profit from sales to competing telecommunications providers; these customers had previously shown reluctance at purchasing from a direct competitor. Bell Labs brought prestige to the new company, as well as the revenue from thousands of patents.

At the time of its spinoff, Lucent was placed under the leadership of Henry Schacht, who was brought in to oversee its transition from an arm of AT&T; into an independent corporation. Richard McGinn succeeded Schacht as CEO in 1997. Lucent became a “darling” stock of the investment community in the late 1990s, rising from a split adjusted spin-off price of $7.56/share to a high of $84. However, on January 6, 2000, Lucent made the first of a string of announcements that it had missed its quarterly estimates, and when it was later revealed that it had used dubious accounting and sales practices to generate some of its earlier quarterly numbers, Lucent fell from grace. By October, 2002, when its stock price bottomed at 55 cents per share, Henry Schacht had been brought back on an interim basis to replace McGinn.

In 1999, Lucent acquired Ascend Communications, an Alameda, California-based manufacturer of communications equipment for US$24 billon. Lucent held discussions to acquire Juniper Networks but decided instead to build its own routers internally. In April of 2000, Lucent sold its Consumer Products unit to VTech & Consumer Phone Services. In October of 2000, Lucent spun-off its Business Systems arm into Avaya, Inc., and in June, 2002, it spun off its microelectronics division into Agere Systems.

In 2002, Lucent began making significant cuts to the health care and retirement benefits of many of its 125,000 retirees. Although Lucent contends these and future cuts are necessary for its survival, they have nevertheless spawned several lawsuits and generated a continuing flow of negative publicity in the news media.

Today, Lucent has 30,500 employees, down from about 165,000 employees at its zenith. Lucent is active in the areas of telephone switching, optical, data and wireless networking. Patricia Russo currently heads the company, succeeding Schacht who remains on the Board of Directors.

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