Whale watching

Lucent Technologies may break off yet another chunk of its core business—its optical fiber solutions unit—one that saw growth of nearly $2 billion last year.

According to “The Wall Street Journal,” the behemoth may soon shed the unit in attempt to salvage its beached whale-like image and raise some fast cash.

While some analysts say the fiber solution unit is worth as much as $8 billion, others say the unit's worth may be closer to $4 billion. Lucent thus far has declined to remark on the sale of the unit. “We can't comment on rumor or speculation, and that's all that it is at this time,” a company spokesman said.

The fiber solutions unit, located in Norcross, Ga., employs 6000 people and is the second largest producer of optical fiber in the world, following Corning, which is a likely suitor for the unit. Other possible purchasers include Alcatel, Cisco Systems, Nortel Networks and even Pirelli, according to Mark Lutkowitz, vice president of optical networking research for CIR.

Who will bid for the unit is a key issue, according to Maribel Dolinov, senior analyst for Forrester Research. The list of suitors is small, not many companies have that much cash on hand, and Lucent is not in the best position right now for a stock transaction, she added.

However, if prime candidate Corning does attempt to acquire the unit, a lot of telcos might protest, Lutkowitz said. Antitrust issues may arise, but the new Department of Justice under the Bush Administration may not halt such a transaction, he said. “There's a difference in philosophy. Republican administrations are more likely to let concentration go.”

The news of the possible sale comes as no surprise to Lutkowitz. “We've been saying this for the last couple of weeks.” The additional cash would be nice for Lucent, he said. Unfortunately, the fiber unit is the one bright light in the otherwise dark times for the company. “They'll be losing the one thing left to still look up to,” said Lutkowitz. “It's really a mess.”

Dolinov believes Lucent needs a “laser-like focus,” to get itself back on track.

“It makes perfect sense,” she said, referring to the possible sale of the optical unit. Lucent will likely turn its focus toward data networking for carriers, following the spin-off of its microelectronics and enterprise divisions and now the fiber unit, Dolinov added.