Lucent hawking fiber unit

(Telephony) Lucent Technologies finally acknowledged it is exploring strategic alternatives--including a possible sale or joint venture--for divesting itself of its capital-intensive Optical Fiber Solutions business.

The sale of the unit, which supplies premium fiber and fiber components and employs 6,300 people, could bring cash-hungry Lucent between $4 billion and $8 billion, according to analysts. Possible suitors include Alcatel, Tyco International, Corning, JDS Uniphase, and Pirelli.

“Over the next few months, we will determine which approach will provide the most benefits for our customers, our shareholders and our employees,” said Bill O’Shea, Lucent’s executive vice president, corporate strategy and business development.

Lucent needs cash, as it is losing more than $1 billion per quarter. But, even if Lucent weren’t in a liquidity crisis, it might have chosen to sell the fiber business, said Paul Sagawa, analyst at Sanford Bernstein & Co.

First, although fiber is a high-margin, profitable business during up cycles, it is highly cyclical and could be headed for a downturn in the current economy, he said. Second, Lucent is trying to sharpen its focus on systems, software and services, and fiber is a questionable part of that equation.

“[Lucent has] gone through a longstanding effort to pare the business down to its core elements,” Sagawa said “None of these businesses [it has spun off or sold] fit the suit.”

A sale or joint venture of the optical fiber business would give the unit an opportunity to expand its customer base and make capital investments to meet the increasing demand for fiber and fiber cable. The optical fiber unit enjoyed 60% revenue growth in the fiscal year ended Sept. 30, 2000, contributing about $2 billion of Lucent’s $33.8 billion in revenue. In the first fiscal quarter ended Dec. 31, 2000, the unit posted a revenue gain, while sales for the service provider networks business declined 36%.

“Demand for premium optical fibers continues to grow as communications providers build the light-powered, high-capacity highways they need to accommodate their customers’ appetite for more and faster access to the Internet, as well as better ways to transport data-networking traffic,” said a statement by Denys Gounot, president of Lucent’s Optical Fiber Solutions.

Optical Fiber Solutions is in the middle of a $1 billion expansion program, which includes a recently opened fiber cable plant in Campinas, Brazil, designed to serve Latin America and the Caribbean. Lucent also recently “commenced” a $250 million investment to increase production capacity of its AllWave metropolitan fiber network products at its Norcross, Ga., facility.