Lucent acquires ATM expertise

Lucent Technologies' announcement last week that it would acquire access equipment vendor Yurie Systems Inc. is a sign that Lucent is stepping up its commitment to asynchronous transfer mode and high-speed data networks. The acquisition will provide Lucent with a multiservice device that supports ATM immediately and other services down the road.

ATM and WAN access are in an "explosive growth phase," said Bill O'Shea, president of Lucent's Data Network Systems group. Lucent and Yurie, which already were OEM partners, will further integrate their products on the research and development front.

Currently, Lucent's Yurie-enabled Access Concentrator 60 and Access Concentrator 120 products sit between the customer and Lucent's ATM switch, aggregating voice, video and data traffic and directly passing them onto the backbone, which is often ATM.

The move brings Lucent further into the ATM access market, and it's a stepping stone to the future, said Frank Dzubeck, president of Communications Network Architects, a Washington-based consultancy. "Lucent was OEMing the product and found they had a problem," he said. "The problem was that as they were going to work on the next generation, they were contributing more than Yurie. What would you do? You'd buy them. They're getting the future."

In acquiring the vendor, Lucent obtains Yurie's 28% market share, Dzubeck added.

ATM isn't the only driver, however, said Cathy Gadecki, senior broadband consultant for TeleChoice. Interface modules eventually will allow Yurie concentrators to support other service types, such as frame relay, high-level data link control and Internet protocol (IP).

"When you think about how service providers will [build] their networks two to five years out, you can see the capabilities they need" are reflected in this acquisition, said Gadecki. "The whole infrastructure of service providers will change in multiple ways-how the inner-working layer works with optics, how voice traffic will be carried as data and the whole IP explosion," she said. "Any one of those would be big, and we're talking about all three happening at once." Buying into a platform infrastructure is a long-term investment for carriers, she said.

Fueling Lucent's desire to own a multiservice device is the company's plan to be a single source for carrier equipment, Gadecki said. The companies to which Lucent wants to sell want a few sources that bring in the entire package, she said.

Especially in the competitive local exchange carrier arena, Lucent hasn't had as strong a presence in data networking as Cisco Systems and Ascend Communications, she said.

Representatives from other Yurie OEM partners, including Bay Networks and Ericsson, claimed the acquisition will not affect them.

"In the short term, I don't see any change. In the long term, I guess it's up to Lucent," said Gary Pinkham, vice president of business development and data networking solutions at Ericsson.

Kevin Dillon, product marketing manager for Bay Network's ATM products, concurred: "We'll continue to offer the MX50 and the MX200, and we'll continue to OEM them." Bay's products don't compete heavily with Lucent's because Bay targets the large enterprise market, not the carrier market, he noted.

Analysts agree that the $1 billion price tag is the only surprise. Dzubeck, who believes Lucent overpaid by 25%, said, "This is an instance of them wanting to acquire something to not have it go somewhere else."

Jeong Kim, Yurie chairman and CEO, will become president of the Carrier Networks division of the Data Networking Systems group.