Lucent operation management

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Carlos Nieva got a phone call in June 1998 from John Heindel, the president of Lucent Technologies, Saudi Arabia. Nieva was the operations director of Lucent’s Spanish factory, which supplied Lucent’s sophisticated digital switching system, the 5ESS® Switch,1 toEurope, Africa, and the Middle East. Heindel explained that an existing network in Saudi Arabia, which had been supplied by a competitor and was capable of several million lines of switching, was not Y2K compliant. The customer had been trying to negotiate for the modification of the existing network, but was now looking for alternatives. Lucent wanted to replace the network with a compliant one, andwas preparing to make a formal bid. If Lucent got the order, it would be worth hundreds of millions of dollars. The entire network had to be in place by mid-1999. To do this, the first sites had to be complete and ready for installation within three weeks of receiving the order. Furthermore, Lucent would not know the precise configuration until the order was placed, and some site-specific detailsmight not be known until much later. In each case, Lucent would have to deliver within three weeks of getting the customer’s detailed site information. Heindel knew that the delivery time for the 5ESS® Switch was normally between twenty-three and twenty-five weeks. Was there any way that they could meet the required delivery? If they could, they would almost certainly receive the order. They hadonly one week before they had to submit their bid. If they chose to go ahead, any changes would have to be implemented quickly, as they expected to receive the order one month after bidding.


5ESS is a registered trademark of Lucent Technologies.

Research Associate David Hoyt and Enrique Lopez-Tello of Lucent Technologies prepared this case under the supervision of Professor Hau Lee asthe basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. The views and opinions expressed in this case study are solely those of the authors and do not represent those of the management of Lucent Technologies. Copyright © 2001 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved. To ordercopies or request permission to reproduce materials, e-mail the Case Writing Office at: or write: Case Writing Office, Stanford Graduate School of Business, 518 Memorial Way, Stanford University, Stanford, CA 94305-5015. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means –– electronic,mechanical, photocopying, recording, or otherwise –– without the permission of the Stanford Graduate School of Business. All data have been disguised to protect the interests of the companies involved. Used with permission of Lucent Technologies. Version: (A) 5/22/01

Lucent Technologies: Provisioning and Postponement GS-02

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COMPANY BACKGROUND Lucent was formed from the restructuring ofAT&T that was announced on September 20, 1995. Lucent would focus on communications equipment, and would include AT&T’s research organization, Bell Labs. Lucent went public on April 4, 1996, the day AT&T sold approximately 17.6 percent of its holdings for just over $3 billion. It became fully independent when AT&T distributed the remainder of its holdings to its shareholders on September 30, 1996 inthe largest stock distribution in U.S. history. For the nine months ending September 30, 1996, Lucent reported revenues of $15.9 billion and profits of $224 million.2 THE 5ESS® DIGITAL SWITCH Lucent’s flagship product was the 5ESS® Switch—a large-scale, software based digital switching platform that provided communications service over any medium, including digital, voice, data, video, wired or...