Lucent's New Role: Venture Capitalist

Looking for a share of a potential $25 billion market, network equipment start-up Ignitus Communications today introduced its initial product, which is designed to enable service providers to cut costs and improve the efficiency of the access portion of their networks.

Although analysts said the company is fortified with innovative technology and a solid management team, Ignitus' greatest advantage over the dozens of start-ups in the access equipment market could be the support of its biggest financial backer, Lucent Technologies.

"Lucent's backing gives Ignitus an automatic distribution channel - one of the best in the world for reaching carriers," said Hilary Mine, an analyst at Probe Research. "That's one of the biggest challenges for a start-up."

Investing money in an innovative company is nothing new for network equipment makers - Newbridge Networks has had some success with a similar business model - but analysts said Ignitus, founded in March 1999 by former Ascend Communications executives, marks a deviation from Lucent's traditional path.

While the company has tried to instill an entrepreneurial spirit by loosening the bureaucratic constraints that typically mark product development inside a large company, Ignitus, according to analysts, is Lucent's boldest attempt to capture that spirit.

"It's a great way to buy into new technology," said Tracey Vanik, an analyst at research firm Ryan Hankin Kent.

Although officials would not specify the amount of money Lucent has put into Ignitus or its percentage of ownership, Dave Marble, vice president of marketing at Ignitus, said the start-up operates no differently from any other new company. While Marble expects to leverage Lucent's marketing and sales might, he said Ignitus can offer prospective employees the lure of a start-up, such as an intense focus on one product and stock options.

Lucent officials were not available to comment on the company's involvement with Ignitus or its plans for distributing Ignitus' products. Vanik noted that the numbering for the Ignitus 3500 Integrated Access Switch coincides with the product numbering for Lucent's access product line.

The Ignitus model might also alleviate another problem. The lure of stratospheric initial public offerings is driving experienced technical and marketing personnel to start-up operations in droves. Lucent's optical division has been hit especially hard recently. Last week, 35-year veteran John Colton left to join Tachion Networks, a maker of next-generation switching gear located near Lucent's New Jersey headquarters.

In December 1999, Colton's former boss, Kevin Oye, vice president of strategy and business development at Lucent, joined Sycamore Networks.

But brain drain is not always about money. "In going to a start-up, a person coming from a place like Lucent is looking for the excitement of starting something new and having a larger scope in the project," Colton said.

Colton's new boss, Jeff Matros, president and chief executive of Tachion, said start-ups springing up in New Jersey will encourage the exodus of Lucent employees.

Lucent officials apparently hope to reduce the loss of technical expertise by giving valuable employees the same financial and intellectual rewards they would get from venture capitalists.