Analyst: Nortel, Lucent in danger of becoming ‘dinosaurs’

Nortel’s announcement this week that it was slashing 20,000 more jobs--on top of the 30,000 cut earlier this year--triggered a flurry of analysis concerning what it and the other equipment vendors must do to assure a catastrophic situation doesn’t worsen.

According to Hilary Mine, executive vice president of Probe Research, both Nortel and Lucent--another high-profile vendor that has cut about 50,000 jobs this year--are “in danger of becoming dinosaurs.” She said both companies have significant chunks of profitability tied up in segments that have been slipping of late.

One of these is circuit switches, a market upon which both companies long have been dependent and one that is going through a significant change.

“Anyone who has been in the software business for a number of years eventually faces a point where their technology becomes legacy and someone else comes in with better technology,” she said. “And switches are essentially software driven.”

While both companies share this challenge, their circumstances are entirely different which will affect how each goes about meting the challenge, Mine said.

“Lucent’s mess is different than Nortel’s. Because it got spun off late, it learned how to compete later than the others,” she said. “Nortel globalized long before Lucent. They used to be dependent on Bell Canada, but they cut back on that dependence quite a while ago.”

The companies have completely different cultures and perceptions in the marketplace, which may help Nortel and hurt Lucent as each begins to reinvent itself in order to cope with a “new world order that is still up in the air.”

“Nortel is perceived as responsive, while Lucent is perceived as arrogant,” Mine said. “Though Lucent may think it is being more responsive right now, it might be too late for that.”