Lucent: For Sale to Good Owner

Gaynell Terrell

Lucent Technologies Inc. has announced plans to sell about a dozen of its 17 US manufacturing facilities to contract manufacturing partners. It will retain five chip and fiber optics manufacturing plants and also will establish a number of system integration houses for products made by its partners.

The restructuring is expected to be completed within 24 months. In a previous announcement in March, Lucent said it was spinning off its $8 billion New Enterprise Networks Group, slower-growing divisions that assemble telephone systems and data networks and corporate clients.

"It makes sense," said senior analyst Paul Silverstein of Robertson Stephens in New York. "Their expertise is not manufacturing, it's designing products. And they're taking advantage of the growth of contract manufacturing. What Lucent is doing is going to become the model for the industry."

By outsourcing to contractors, Lucent expects to reduce inventory and future investment in manufacturing technology, freeing up capital to focus on research and development and growth areas such as system integration.

"The sophistication of contract manufacturers has increased to the point that we can rely on them more," said Lucent spokeswoman Mary Ward. "Clearly, one of the reasons we're doing this is that it gives us flexibility."

Lucent will continue to operate its facilities that call for specialized engineering expertise and equipment, such as the fiber optic drawing plant in Atlanta, Ward said. It also will keep an optoelectronics plant in Breinigsville and semiconductor plants in Allentown and Reading, all in Pennsylvania, and a wafer fabrication plant in Orlando, Fla.

In a separate announcement in April, Lucent said it would invest $150 million to expand its optical networking plant in Dublin, Ireland. The location of the facility will allow the company to significantly cut shipping time to European and Asia/Pacific customers.