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Equity Notes: Lucent still luminous in startups’ eyes

01/27/2003 08:35 AM
Despite its woes (all $11.8 billion of them — its losses for 2002), Lucent Technologies hasn’t lost its luster among startups.

Both Continuum Photonics and Taqua Systems, for example, have recently named ex-Lucent bigwigs to their boards of directors.

Continuum, an optical switching subsystems maker in Billerica, has added retired Lucent chief operating officer Daniel Stanzione to its board.

For Continuum, Stanzione’s appointment is all about access.

“With Lucent in particular, they’re a bit down along with other telecom systems companies,” said Continuum chief executive Jeff Farmer. “But they’re working on a couple of new programs that are of interest to carriers, including Verizon. So (Lucent) is still an important customer to us.”

Farmer’s being generous in saying that Lucent is just “a bit down.” But Lucent is nevertheless a force to be reckoned with. Even in the midst of the worst telecom economy in memory, Lucent sold $9.6 billion in product and another $2.7 billion in associated services. That’s a lot of product, and to make that product, Lucent needs a lot of subsystems.

Farmer isn’t interested just in the influence Stanzione might have at Lucent — he’s also hoping Stanzione will give Continuum added credibility with big carriers. Continuum intends to sell its optical subsystems to equipment manufacturers, but unless the carriers want the type of gear that requires Continuum’s components, Continuum won’t have a market to sell to.

“(Stanzione) will help us get to know carriers a little better and potentially influence their purchasing decisions,” Farmer said.

Continuum expects to ship its first prototypes to prospective customers in April.

For switch maker Taqua Systems, the arrival of former Lucent CEO Richard McGinn to its board came as part of a $20 million package.

McGinn is a partner at RRE Ventures, the venture capital firm that led Taqua’s latest funding round.

To date, Taqua has raised $140 million.

McGinn took the reigns at Lucent in 1997, and led the company through an unprecedented acquisition tear until October 2000, when the Lucent board of directors ousted him following a series of sharp declines in Lucent’s profits and share price.

So McGinn isn’t exactly a noncontroversial figure in the telecom world. Nevertheless, Taqua chief executive Charlie Vogt sought out RRE Ventures in the hope that McGinn would join the Taqua board.

Vogt, who had served as a senior vice president at Ascend Communications, got to know McGinn after Lucent’s $23.7 billion acquisition of Ascend in 1999.

“In my opinion, he’s been rubbed with the wrong salt regarding Lucent,” Vogt said. “He did a tremendous job with Bell Labs, AT&T and spinning Agere out of Lucent.”

Taqua, which is based in Richardson, Texas, but has a sizable research and development facility in Hyannis, struggled early on with its compact class-five switch.

But over the last 18 months, the company has found its niche selling to rural local exchange carriers. To date, the company has won 43 customers. Last year, Taqua brought in $10 million in sales. Vogt expects that figure to double for 2002.

McGinn’s arrival is part of Vogt’s plan to use Taqua’s experience in the rural market to penetrate the former Baby Bells.

“You’re not going to sell to the large carriers without some time deploying equipment somewhere else,” Vogt said. “I don’t see the Verizons or the SBCs of the world buying equipment any more from companies that aren’t profitable and don’t have a lot of switches in place.”

Jeff Miller reports on telecommunications, finance and venture capital. He can be reached at jmiller@masshightech.com.

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