FINNOV

Abstract: In 2000, with the Internet boom at its apex, Lucent Technologies was the world’s largest telecommunications equipment company in terms of both revenues and employees. Yet in 2006 Lucent’s sales were only 21% of their level in 2000, and the company was smaller than its  three major rivals, Ericsson, Alcatel, and Nortel, even though all had gone through wrenching declines as the Internet boom turned to bust in the early 2000s. On December 1, 2006 Alcatel was almost twice the size of Lucent when the merger that created Alcatel-Lucent took place. Lucent became a wholly-owned subsidiary of the French company. In this paper, we analyze the rise and demise of Lucent Technologies. We show how its growth in the last half of the 1990s was primarily based on its “incumbent’s advantage”, producing equipment for “dialup” Internet. Then we show how strategic missteps and financial excesses at the peak of the boom worsened Lucent’s decline in the Internet crash of 2001-2003, and left it without the resources to remain a full-line competitor in the subsequent recovery. This paper is part of a larger industry study that analyzes how financialized decision-making let to the bankruptcy of Nortel, and why European communications technology companies such as Alcatel, Ericsson, and Nokia fared much better in the 2000s.