Lucent Forms Venture Capital Fund

Lucent Technologies, the manufacturing company spun off in 1996 by AT&T Corp., has formed a venture capital fund to invest in new technologies, and its chairman will step down to head the unit, the company said Wednesday. The new fund, Lucent Venture Partners Inc., will be funded initially with $100 million and seek investments in emerging technologies such as data networking, semiconductors and communications software, Lucent said. Lucent Chairman Henry Schacht will step down and become chairman of the new fund. Chief Executive Rich McGinn will take on the additional position of chairman. Reuters

Schacht came out of retirement to head Lucent after AT&T spun the company off, but he was always slated to be a short-term mentor to McGinn.

 

Separately, Lucent said it approved a two-for-one stock split and raised its quarterly dividend.

Its stock was up $4.875 at $97.44 in consolidated late afternoon trading on the New York Stock Exchange.

The fund, which will consider direct investment or partnerships with other capital firms, is expected to make its first investment later this quarter.

John Hanley, who was named managing general partner of the new venture, said it will be looking for technologies that mesh with its work at Bell Labs, the companys research and development arm, or fill any holes in Lucents strategy.

The focus will be on cutting-edge technologies that fill particular niches in communications networking, Hanley said.

Its a very good strategy because Lucent can invest in new technologies without having to bring the development in-house, said Christopher Thompson, a voice communications principal analyst at DataQuest.

They can leverage the rapid pace of small companies that might be stifled or whose technologies might be expensive to deploy if Lucent did the work in-house, Thompson said.

Lucent Venture, which will have operations on both coasts, will leverage external investments into the companys existing operations through joint marketing agreements and joint product development efforts, Lucent said.

Lucent has been quiet and not very aggressive in venture capital, said Frank Dzubeck, computer network analyst and president of Communications Network Architects Inc.

He expects the fund to look like a similar group at Cisco Systems Inc., buying 5 percent or 10 percent of a start-up company to get in on the ground floor. Then if they like it, they buy the company.

Schacht has been through this. This is one of those areas where experience is worth a million dollars, Dzubeck said.

The fund is unlikely to provide seed money, analysts and Lucent said, looking instead for companies that are more mature, but still developing.

Several other high-tech firms, such as Cisco, Adobe Systems Inc., Intel Corp. and Newbridge Networks Corp., already have venture capital operations in place.

Lucent produces communications systems and software, data networking systems, business phone systems and microelectronic components.

The company said the stock split will be effective April 1 to shareholders of record March 6. Lucent said it raised its quarterly dividend to 8 cents a share from 7.5 cents on a pre-split basis.