After Lucent Technologies delivered its bad news this month — a first-quarter revenue shortfall and a flat fiscal year in 2006 — some on Wall Street wondered if the company should consider cutting some of its less popular products. But where to cut? Though the shortfall probably came from mobility, analysts say what Lucent needs there are not fewer products but more customers, as its highly successful CDMA business nevertheless rests on only a few key clients.

Lucent already has slashed its wireline business. But according to researchers for Dell'Oro Group, Lucent leads the global optical switch market, and its 10% share of the overall optical market puts it in third place there (for the 12 months ending in September 2005). Some analysts think Lucent could do without its access business because its newest product offering is crowded by competition. (Lucent owns just 5% of the global access market and ranks 14th in DSL customer premises gear, according to Dell'Oro.)

“That's just not a money-maker for them,” said analyst Jim Kelleher, who covers Lucent for Argus Research. Then again, access serves as a differentiator from rival Nortel Networks.

“Maybe instead of having five or ten varieties of the Stinger access box, say, ‘What you want, we'll have built for you,’” Kelleher said.

Lucent doesn't quite excel in the carrier IP telephony gear market, either, holding just 3% of the market despite its 2004 acquisition of Telica. But analysts find it hard to imagine Lucent abandoning voice over IP (VoIP) or access because both are intimately tied to one of Lucent's key strategies for growth: IP multimedia subsystem (IMS) architecture, a market UBS Investment Research estimates could be worth $2.5 billion to $5 billion by 2009.

“IMS requires them to be in access, wireless, optical, VoIP,” Kelleher said. “I don't know that there's any area they can really afford to get out of and not shake the foundation of IMS, which is sort of the future of the company.”

In fact, Lucent has argued that IMS will open doors for the company in access, wireless, optical and VoIP. A similar philosophy surrounds its services business: The more involved the firm is with customer networks, the more opportunities to sell gear.

“[CEO Pat] Russo has said, ‘IMS gives us a seat at the table,’” said Joe Chiasson, Susquehanna Financial Group analyst. “The question is: How much are investors willing to pay for that seat?”