Lucent Technologies Inc.'s decision this week to put its power-systems business on the selling block is yet another sign that the company is anxious to advance its master plan.
Just weeks after announcing it would shed 12 U.S. plants and outsource manufacturing to subcontractors, the company put its power-systems unit up for sale.
Lucent is the leading vendor of power supplies in the United States and worldwide. But power supplies no longer fit into the company's business model, executives said.
"The bottom line is that Lucent's doing this because it makes good strategic sense for Lucent and the power-systems business," said Bruce Brock, chief operating officer and vice president of Lucent's power-systems business. "From a corporate perspective, it's really a case of the right fit and focus."
Lucent is honing its core networking technologies-optical and data networking, wireless, semiconductors, optoelectronics, and professional design and consulting services- allowing it to better leverage its capital and R&D investments, Brock said.
Still, the company is giving up a juicy part of its business. Last year, the power-systems unit generated sales of $1 billion and $1.2 billion in the United States and worldwide, respectively, making Lucent the leading player in both markets, according to Mohan Mankikar, an analyst at Micro-Tech Consultants, Santa Rosa, Calif.
Lucent said its power-systems business is experiencing double-digit growth and has increased its customer list sevenfold in the past five years.
The fact that some of Lucent's power-systems customers were also competitors, however, had a strong bearing on the company's decision to sell the business, Mankikar said.
"With power systems, Lucent competes with its customers, such as Nortel or Cisco, which might be discouraged from buying from Lucent since they're also competitors," Mankikar said.
Lucent's power-systems products provide the power-supply, power-conversion, and backup power devices for wireless, optical, switching, and other equipment for communications networks. Lucent also offers custom-design, engineering, installation, and technical-support services.
Lucent's power-systems business has 4,700 employees and is headquartered in Mesquite, Texas. Its largest facilities are a 1 million-sq.-ft. plant in Mesquite and another in Matamoros, Mexico.
Lucent said it expects to name a buyer for its power-systems business within six months.
While analysts said it was too early to cite interested buyers, one industry source said Emerson Electric Co. and General Electric subsidiary Marconi Com. are likely candidates because of their size and position in the marketplace.
Emerson Electric was the third-largest global supplier in 1999 with sales of $830 million; Marconi Com. came in eighth, at $360 million, according to figures from Micro-Tech Consultants.
The $22 billion power-supply market is expected to grow to $33.8 billion in 2004, Mankikar said.