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Telecommunications equipment industry

Lucent Technologies Inc. Partners with Level 3 Communications for Internet-Based Phone Calls

Strategic Insights

— 2 min read

Lucent Technologies Inc. and Level 3 Communications Inc. have formed a significant partnership for the transmission of phone calls using Internet technology. This deal marks a major step forward for Level 3, which plans to use a pure Internet approach to deliver phone calls, video signals, and Web pages. Level 3 has signed up as the first major company to use Lucent's "softswitch" software, which replicates the strengths of traditional phone switches using Internet technology. The softswitch, running on standard computer workstations, promises to provide reliability and features at a fraction of the cost of traditional phone switches.

Key Takeaways:

  • Level 3 Communications Inc. has partnered with Lucent Technologies Inc. for up to $1 billion worth of equipment for transmitting phone calls using Internet technology.
  • Lucent's softswitch software is designed to provide the reliability and features of traditional phone switches at a fraction of the cost.
  • The softswitch is software that runs on standard computer workstations and is intended to support phone calls, video signals, and Web pages using Internet technology.
  • Level 3 will purchase at least $250 million in equipment from Lucent over four years, with the potential for $1 billion over five years.
  • Cisco Systems Inc. is developing a rival product called the virtual switch controller, which is being tested by Sprint Corporation.
  • Lucent is also close to an agreement to acquire Nexabit Networks Inc. for $600 million to $800 million to obtain high-speed Internet switches required for the softswitch.

Statistics:

  • $1 billion: The maximum value of the equipment deal between Lucent and Level 3.
  • $250 million: The minimum amount Level 3 will spend on Lucent equipment over four years.
  • $1 billion: The maximum potential value of the relationship between Lucent and Level 3 if the $1 billion in equipment is purchased over five years.
  • $65.6875: The price per share of Lucent Technologies Inc. stock after the deal was announced.
  • 43.75 cents: The increase in the price of Level 3 Communications Inc. stock after the deal was announced.
  • 50-60%: The percentage of Level 3's spending on Lucent equipment dedicated to the softswitch.
  • $20 billion: The acquisition price of Ascend Communications Inc. by Lucent Technologies Inc.
  • $600-$800 million: The estimated value of Lucent's potential acquisition of Nexabit Networks Inc.

Sources:

  • "Bolstering its cyberspace credentials, Lucent Technologies Inc. agreed yesterday to sell up to $1 billion worth of equipment to Level 3 Communications Inc."
  • "Level 3 is using mostly high-speed Internet switches made by Cisco Systems Inc., the data communications giant, in the core of its network."
  • "Lucent said that its softswitch had been developed for Sun Microsystems Inc.'s Solaris operating system, a version of Unix, and that it would be converted for use on the Microsoft Corporation's Windows NT system, the Hewlett-Packard Company's systems and potentially Linux, a free version of Unix."
  • "Only 50 percent to 60 percent of Level 3's spending will be on the softswitch, with the rest going for other Lucent products geared mainly for transmitting phone calls using Internet technology."

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