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Network hardware industry

Lucent Technologies Expands Service and Support Business through Acquisition

Strategic Insights

— 1 min read

Lucent Technologies has announced plans to expand its service and support business after acquiring International Network Services (INS), a leading independent network consulting business. The acquisition, which involves an offer of 0.85 Lucent shares for each INS share, is valued at $3.7 billion. This move comes as a significant coup for Lucent, allowing it to strengthen its position in the growing market for next-generation networking, which promises to combine computer and telephone services into a single system delivering voice, video, and data.

Key Takeaways:

  • Lucent Technologies will expand its service and support business through the acquisition of International Network Services (INS) for $3.7 billion.
  • The acquisition will give Lucent a stronger presence in the market for next-generation networking, which is expected to grow at a rate of 16% per year and reach $153 billion by 2002.
  • INS has reported revenues of $315 million for fiscal 1999, an increase of 82% over the previous year, and net income before charges of $32.2 million.
  • John Drew, chief executive of INS, has acknowledged that the relationship with Cisco Systems, which holds about 8% of INS and has a seat on its board, will need to be realigned following the acquisition.
  • Lucent's expansion into the consulting and services business contrasts with Cisco's strategy of working with independent consulting groups, with Cisco recently investing $1 billion in KPMG and forming a strategic alliance with the consulting and accounting group.

Statistics:

  • Lucent shares dropped 4% to 611/16 after the acquisition was announced.
  • INS shares rose 5.93% to $501/4.
  • INS has grown at a rate five times the market, with revenues of $315 million for fiscal 1999 and a net income before charges of $32.2 million.
  • The market for next-generation networking is expected to reach $153 billion by 2002, growing at a rate of 16% per year.
  • Cisco holds about 8% of INS and has a seat on its board.

Sources:

  • Financial Times Limited 1999. All Rights Reserved.

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