Lucent Expands Optical Networking

Lucent Technologies Inc. Wednesday
purchased optical transport solutions provider Chromatis Networks for approximately
$4.5 billion in stock.

Lucent will exchange about 78 million common shares for all outstanding Chromatis equity. The deal is expected to be completed by the end of June.

A privately-held firm, Chromatis recently introduced a new technology that
reduces the cost of building metro optical networks by nearly 50 percent,
while radically improving optical network performance.

Richard McGinn, Lucent chairman and chief executive officer
said the Chromatis acquisition would enable it to bring the
bandwidth-expanding power of optical technology directly to its business

“The acquisition gives Lucent a leadership position in the fastest-growing
segment of the optical networking market,” McGinn said.

“With Chromatis, Lucent is one step closer to bringing the speed and power
of fiber optics all the way to a customer’s desktop,” McGinn added. “This
acquisition will allow us to enhance what is already recognized by the
industry as the broadest portfolio of optical networking products.”

Bob Barron, Chromatis chief executive officer, said the deal partners its
fiber optic networking capabilities with Lucent’s longstanding leadership
in the industry.

“The combination of Lucent and Chromatis will provide the industry with
next-generation metro optical networks that meet the cost and capacity
requirements for both traditional service providers as well as the very
different requirements of the new broadband Internet service providers,”
Barron said.

Chromatis’ flagship product, the Metropolis system, is an industry first
that integrates data, voice, and video services together on metropolitan

The system combines the different types of network traffic onto a wave
division multiplexing system. WDM relieves network congestion by providing
vast amounts of bandwidth in the form of multiple optical wavelengths that
blast traffic through the network at the speed of light.

All Metropolis products feature a technology which allows network providers
to deploy only the optical wavelengths they need, where and when they need
them. Its selective wave division multiplexing creates savings for firms
looking to provide metropolitan broadband connectivity services while
reducing start-up costs.

Barron said while Chromatis may have pioneered WDM technology, Lucent would
take it to market and extend its reach into mainstream metropolitan networks.

“Chromatis pioneered the integration of WDM with multi-service access for
carriers’ metro networks and has emerged as the recognized leader in this
rapidly growing market,” Barron said “Lucent has long been an innovation
leader in optical networking and is the worldwide leader in optical WDM
systems deployed.”

Barron will stay on with Lucent, as will all five co-founders of the
company, including Rafi Gidron and Orni Petruschka. Chromatis will become
part of Lucent’s Optical Networking Group.

Independent research firm Pioneer Consulting LLC
estimates the worldwide metropolitan optical networking market will have an
annual compound growth rate of 61 percent through 2004.

Metropolitan networks act as a bridge carrying Internet, data and voice
traffic from the larger network core to commercial office complexes and
residential customers living in high-rise buildings.

According to Pioneer, this new market is fueled by an enormous influx of
venture capital and a widespread requirement among new CLECs, out-of-region
ILECs, and metro-oriented IXCs seeking to build low first-cost metro
networks with highly integrated, scalable systems.

Because these are short-distance netw

orks with a mix of existing and new
equipment and service requirements, optical networking has not previously
been seen as a cost-effective solution until Chromatis developed the fix.

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