Lucent to Spin Off Gov. Group

Lucent Technologies will form a subsidiary to perform
classified research and development work for the U.S. government as part of
its agreement to merge with French networking giant Alcatel.

Should the $25 billion blockbuster merger win
approval, certain contracts that Bell Labs and Lucent have with U.S. government
agencies will be offloaded to the new subsidiary.

Lucent said in a statement the move will ensure that work of a “sensitive
nature” continues to be performed in the U.S. under the aegis of Bell Labs.

This work could include contracts that involve the development technologies
used to gain an advantage in influencing warfare.

A board of three U.S. citizens who carry
a lot of security and defense cache in the country will manage the subsidiary: William Perry, who will chair the board, served as
Secretary of Defense for the United States from 1994 to 1997; retired
Lieutenant General Kenneth A. Minihan, who was director of the National
Security Agency from 1996 to 1999; and R. James Woolsey, who served as
director of Central Intelligence from 1993 to 1995.

Bell Labs President Jeong Kim, a former nuclear submarine officer in the
U.S. Navy who is well regarded in the intelligence community, will continue to
lead Bell Labs, which will remain in New Jersey.

“We will implement the combination between Lucent and Alcatel with U.S.
national interests as one of our critical priorities, so that we can continue
to assure protection of our classified work for the U.S. government,” said
Pat Russo, who will serve as CEO of the combined company after the merger
and currently is CEO and chairman of Lucent.

The decision makes sense in the pending merger between Lucent and Alcatel,
both leaders in making gear that helps make communications and data routing
more efficient.

For the last several years, Lucent and Alcatel have made their names trusted
brands in the defense and national security sectors.

Lucent is no stranger to this type of movement, having been spun off from AT&T’s Bell
Labs in 1996.

But the company has watched its legacy business decline since the bubble
created by overvalued Internet stocks burst in 2000.

While Lucent has climbed back to profitability in the past few years, it slashed
revenue guidance for the first quarter of fiscal 2006 to about $2.05
billion, significantly lower than the $2.44 billion estimate of analysts
polled by Thomson First Call.

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