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Communications market will hit $900B by 2003, Lucent chair predicts

Richard A. McGinn, chair and CEO of Lucent Technologies and the 18th Industry Leaders in Technology and Management lecturer, touted the communications industry -- broadly defined as technology, services and content -- as the most intellectually stimulating place to work.

This dynamic market is expected to reach $900 billion by 2003 in terms of infrastructure, microelectronics and optical electronics, and devices relating to telephone, Internet service providers (ISPs) and wireless services, said Mr. McGinn, who sported a beaver-dotted tie (a gift from his 10-year-old daughter) as he spoke to MIT students and faculty May 5 about the "most dynamic industry in the world."

Investments in the Internet infrastructure itself are expected to grow 61 percent a year in the near term, he said. Innovations in switching fabric, cyber carrier networks, broadband access and integration are fueling this growth.

And Mr. McGinn is working to make Lucent Technologies a major player. "Since 1995, we've taken a $20 billion business and, through 1999, moved it to almost $40 billion, and taken profits from $500 million to almost $4 billion," he said. "We describe that as directionally correct."

President Charles Vest, in his introduction to the lecture sponsored by the Office of Corporate Relations and the Center for Technology, Policy and Industrial Development, said Mr. McGinn's vision is driving Lucent to its current success. "By both profession and instinct, he is a true believer in the power of scientific and technological innovation to sustain the world's economic strength and improve our quality of life. He's made that belief the heart of Lucent's business plan," he said.

Lucent's business plan is a tough call for change. "We spun off when we were not ready for prime time," Mr. McGinn acknowledged. "We set about trying to change the income statement as well as the balance sheet, change the revenue growth, improve the growth margin, reduce the expenses, increase the amount spent on R&D, reduce the tax rate and improve our return on assets overall -- and we're about halfway there."

Mr. McGinn is driving these changes as Lucent competes in multiple communications markets -- devices, silicon, opti-devices, services, engineering services, software management, billing systems, and the systems business. "We hold #1 or #2 positions in all those areas on a worldwide basis with lots of very aggressive competition," he said.

As he looks to the future, Mr. McGinn sees these key innovations occurring:
��������� Switching 'fabric' will aggregate traffic and then move it into the core networks in a mesh architecture environment.
��������� Cyber carriers will convert communications servers into repositories of knowledge on the network. Cyber-centers are now being set up comprised of switching fabric, huge computing capability and enormous storage array networks.
��������� Broadband managers are setting up businesses that use micromechanical machines to set up and take down circuits every five seconds to sell bandwidth on demand.
��������� Integration of wireless and optical systems will support large-scale data traffic as well as voice.

Mr. McGinn noted that computers were invented to calculate the trajectory of bombs, but now their primary mission is communication. "Steve Jobs believes that it's all about communications now, and others are beginning to see it the same way. The same kind of evolution is going on in our space as well, driven by technology and technologists, an insatiable demand for bandwidth. Someone has said human needs are no longer shelter, food, water and sex -- the other human need is bandwidth. And they also said you can't get enough of it -- about the bandwidth."

A version of this article appeared in MIT Tech Talk on May 17, 2000.

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