Lucent solidifiesfocus on CDMA

In a tight economy, Lucent Technologies is scrapping its efforts to be all things to all wireless customers and will no longer pursue EDGE, GSM 1900 MHz and GSM 850 MHz technologies. Instead, the company will put the majority of its R&D dollars on wideband CDMA and cdma2000.

The decision has prompted AT&T Wireless and Lucent to cancel their GSM equipment deal they announced last December. Lucent, along with Ericsson and Nokia, won contracts with AT&T Wireless to provide GSM/GPRS base stations for the carrier’s nationwide GSM rollout. Lucent was to provide the GSM Flexent Macro Cell that was commercially available for GSM and GPRS deployments at 850 and 1900 MHz. Analysts had valued Lucent’s share of the contract at about $400 million.

"Given Lucent’s decision…we decided not to purchase 2.5G base-station equipment from the company,” said an AT&T Wireless spokesman. The development will not have any effect on the timing of AT&T’s 2.5G network rollout, he added. "Both Nokia and Ericsson have assured us they see no difficulty in meeting our additional needs and schedule.”

Lucent also has told another major TDMA customer, Cingular Wireless, that it doesn’t plan to support GSM in North America or EDGE, a technology designed to let GSM and TDMA operators deploy 3G high-speed data services in existing spectrum allocations. Cingular hasn’t announced its next-generation technology but has hinted it will deploy EDGE.

The carrier could not be reached for comment.

As part of its massive restructuring,  Lucent is focusing all its efforts around the mobility and wireline segments and lining up R&D programs, said Scott Erickson, senior vice president of global marketing and business development for Lucent. "We’re really going to focus on our strengths, and those are CDMA-based technologies, W-CDMA and cdma2000.”

Erickson said Lucent will continue developing GPRS technology for its international GSM 900 MHz and GSM 1800 MHz customers such as T-Mobile and Saudi Telecom—despite rumors that Lucent plans to close its GSM projects.

"We have not made a business decision to exit the GSM business,” Erickson said. "Our decision is to limit future technologies and refocus on high-speed data strategies.”

Lucent’s decision, while strategically significant, shouldn’t have a major effect on the overall wireless market.

About 80% of Lucent’s wireless sales come from CDMA and cdma2000 markets (see figure), which are expected to grow more than 10% next year, according to Merrill Lynch. Lucent has a weak share in the global GSM market, with scattered contracts internationally and virtually none in the U.S. Meanwhile, support for EDGE technology throughout the world has waned.

"A lot of these companies are becoming a lot more focused on R&D and product investment,” said Bob Egan, vice president and research director for Gartner Research. " This is about survivability.”

Lucent is the dominant CDMA vendor, but it may have to work hard to win business in the W-CDMA world. Incompatible with today’s flavor of CDMA,

W-CDMA is the 3G technology favored by European operators that have closer relationships with existing vendors such as Nokia and Ericsson.

"Our intent is to play on our strengths,” Erickson said. "You’ll see we’re in the lead in understanding the core technology.” Although Lucent may not supply UTRAN radio network controllers and base stations, it will undertake major efforts on the mobile intelligent network side, including data services and voice portals, he said. "No one has done that over there yet.”