Lucent to spin off phone switching business

Lucent Technologies last week said that it plans to spin off its phone switching business to concentrate on fibre optic and internet equipment.

The telecoms giant will form a separate company from its private branch exchange, Systimax structured cabling and Lan-based units. The new company will employ 34,000 staff, 23 per cent of Lucent's existing workforce.

Paul Sagawa, analyst at Sanford Bernstein & Co, said: "The businesses being spun off have been a drag on overall Lucent results. This makes the resulting Lucent an extremely vibrant growth engine".

Lucent's chairman and chief executive Richard McGinn said the move would enable the supplier to focus on internet and telecoms hardware for large companies, a market in which it will compete with Cisco and Nortel Networks.

"We will concentrate greater resources on fast growing areas such as optical networking, internet infrastructure, web-based enterprise solutions linking private to public networks, wireless, semi-conductors, optoelectronics and professional design and consulting services for service providers and enterprises," said McGinn.

Sales from Lucent's fibre-optic parts business rose by 83 per cent last year compared with the 1998, while the units the company is shedding saw growth of only eight per cent. But McGinn said that he expects the supplier's revenue to increase by about 17 per cent this year.

Lucent said that it expects the spin-off, which has been approved by the board of directors, to be completed by 30 September. It will be accomplished through a tax-free distribution of shares to Lucent's shareowners.

The company's share price soared on the news, rising 14.29 per cent to close at $68 in trading of 76.9 million shares.