Lucent Technologies Expands Service and Support Business through Acquisition

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.

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