Lucent Technologies

Babson Professor Joel Shulman, Case Director

Carl Hedberg, Case Writer

Arthur M. Blank Center for Entrepreneurship,

© Babson College, 2002.

Abstract

When deregulation opened the U.S. telecommunications market to competition in 1995, AT&T was broken into three separate companies. On April 4th, 1996, Bell Labs is spun off as Lucent Technologies. Over the next three years, the company expands rapidly through mergers and numerous acquisitions, giving Lucent leadership positions in emerging markets such as digital signal processors for wireless communications, communications software, and dense wavelength division multiplexing, a technique that split optical fibers into multiple lanes for increased capacity. This period of massive expansion is highly successful, as the company continually outperforms analysts’ expectations, share values grow 1,000 percent, and Lucent is considered one of the best companies for which to work. However, in late 1999, the tides begin to turn for Lucent: the company does not achieve its optimistically predicted revenue growth for the year, the integration of a key acquisition does not proceed smoothly, its core strategy becomes less and less clear, and stock prices begin to plummet. During the next two years, the company attempts to rectify the situation by changing leadership, divesting assets, suspending perks and reducing the workforce. Despite this restructuring process, in 2002 the current CEO must consider what steps will be required to ensure the long-term viability of the company.

Location: Global company, headquartered in Murray Hill, NJ

Date: 1995 to 2002

Industry: Telecommunications, high-technology industry segments

Stage of company: High growth through mergers and acquisitions

Age of entrepreneurs: Mid-forties to mid-fifties

Key Words: Telecommunications, high-growth, mergers, acquisitions, expansion, corporate restructure, leadership change, downsize

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