Abstract: The Rise and Demise of Lucent Technologies

William Lazonick and Edward March


In 1999, as the Internet boom was approaching its apex, Lucent Technologies was the world's largest telecommunications equipment company. With revenues of $38.3 billion, net income of $4.8 billion, and 153,000 employees for the fiscal year ending September 30, 1999, Lucent was larger and more profitable than Nortel, Alcatel, and Ericsson, its three major global competitors. In fiscal 2006, however, Lucent's revenues were only $8.8 billion and its employment level stood at 29,800. Both figures were lower than those of its three major rivals. On December 1, 2006, the merger that created Alcatel-Lucent took place, making Lucent a wholly owned subsidiary of Alcatel. In this paper, we analyze the rise and demise of Lucent Technologies from the time that it was spun off from AT&T in April 1996 to its 2006 merger with Alcatel. Our analysis of the case of Lucent shows the ways in which strategy, organization, and finance interacted to enable both Lucent's rapid growth in the late 1990s and its loss of competitive capabilities in the first half of the 2000s.

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