After nearly three years, growing demand for new wireless technology may help telecommunications service and software provider Lucent Technologies finally get back on track.
Chairman Henry Schacht, who spoke at the University Business School yesterday, cited the collapse of the technology industry in 2000 as the primary reason for Lucent’s sustained and dramatic tumble in stock value.
“There had been a total collapse. There was a great deal of buying in 1998 and 1999. Then there was a severe fall in demand (because) people that had been buying a lot of equipment reached overcapacity, and had no need for it,” he said.
Business School associate Prof. Alan Afuah said telecom companies like Lucent – whose revenues have fallen 42 percent since last September – had overestimated demand for new technology and are now readjusting their strategies to meet the current market’s needs.
“(Lucent) is now providing products for both the wireless and wireline companies in a more streamlined way,” he said. “There is more focus on serving specific needs of customers instead of trying to do everything for everyone.”
In addition to revamping their selling strategy, Schacht said the company has moved to cut costs and better reposition itself for a recovery.
“We’ve been reducing our expenses and head-count substantially, but we’re just going to have to wait until our customers buy again,” he said. “(We have to) be in a position to take recovery in the market when it comes. We expect to return to profitability next year.”
Afuah, who teaches corporate strategy and international business, said Lucent is using the right approach, but that intense competition makes him hesitant to predict the company’s future.
“It’s too early to tell, (because) they have a bunch of competitors – all these companies worldwide – that are trying to do the same thing, like Nortel and Siemens,” he said.
Despite this competition and cautious expert forecasts, Schacht remains optimistic about the future of Lucent and the technology sector.
“They’re predicting the industry will probably not recover in ’03 and should show some signs of recovery in ’04. We certainly hope that’s pessimistic, but we’ll wait and see,” he said.
Afuah said he was also confident about Lucent’s potential to make a future market recovery.
“The company certainly has a chance. Somebody’s going to win. The demand is growing,” he said. “You have a cell phone, right? We use the Internet. There will always be demand for communications.”