Navy Contract Lights Up Lucent

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Navy Contract Lights Up Lucent

By Shannon Henry
Staff Writer

Just six months after launching its government solutions unit, Lucent Technologies has snagged the biggest piece of a federal communications contract worth an estimated $2.9 billion over the next 10 years.

The U.S. Navy awarded Murray Hill, N.J.-based Lucent the only full contract to supply networks, equipment and telecommunications services for the Voice Video and Data project. Known as ViViD, the effort includes connecting Navy ships and upgrading the current communications infrastructure.

The indefinite-delivery, indefinite-quantity, fixed-price contract, however, is competitive: GTE, Bell Atlantic and AT&T all received partial contracts, meaning Navy officials could choose any of those companies to do portions of the work.

But only Lucent and GTE remain in the game today: Both Bell Atlantic Federal Systems and AT&T Government Markets turned down the award, claiming it would not make business sense to remain in the contract.

"For Lucent, it was a home run," said Jon Klem, senior vice president of Federal Sources Inc. in McLean, Va.

Indeed, the ViViD contract is perhaps the greatest achievement yet for the company that spun off in February 1996 from AT&T - taking with it the valuable Bell Laboratories research arm - and wildly exceeding expectations in technological innovation, stock price and aggressive movement into the integration market.

David Sharpe photo Jim O'Neill, Lucent "What commercial vendor can give a contract of $2.9 billion and have global implications?"

ViViD is the largest communications contract ever awarded by the Navy and it's Lucent's biggest win yet. But it also stands as a huge morale booster for the company that once looked like the unwanted country cousin of AT&T. Now AT&T is battling many problems, including the loss of long distance market share and the recent ousting of CEO heir apparent and president John Walter.

"It's been an incredible six months," said O'Neill. "People are really jazzed. We're the Cinderella company of the '90s."

O'Neill said it is possible AT&T and Bell Atlantic would still subcontract with Lucent on the ViViD project. The latter should help Lucent expand into the global government integration market as other countries see the kind of work it will do for Navy, he said.

"We will leverage this internationally," said O'Neill. "Once you win these kinds of contracts, others abroad want to find out what you're doing."

Overall, ViViD is part of a government solutions plan to focus more on Army, Air Force and civilian business. And Oct. 1 will mark the start of Lucent's new state and local government strategy, O'Neill said.

Though many integration companies are shifting toward commercial work, O'Neill said he thinks the government market is more exciting. "What commercial vendor can give a contract of $2.9 billion and have global implications?" asked O'Neill.

For Lucent, $2.9 billion has been a lucky number - it was also the amount of the company's enormous initial public offering in April.

The ViViD contract, which is managed by the Space and Naval Warfare Systems Command, is expected to get moving quickly. Navy bases are likely to start ordering in a month or so, said Cmdr. Phil Grahm, a Navy spokesman.

"This will modernize our current systems," said Grahm. "It will be more of a commercial, up-to-date infrastructure."

For this project, GTE has all of the contract that Lucent holds except for a local access and usage portion. But there's a difference from the partial awards that AT&T and Bell Atlantic received. GTE got everything it bid for, said Ed Hudson, ViViD program manager at GTE Worldwide Telecommunications Services.

"We were surprised [that the other companies dropped out]," he said. "It's a major opportunity."

GTE's major partner on the project is Electronic Data Systems Corp. in Plano, Texas. GTE will provide products and services such as data networking equipment, network management, security systems and telephone switches. EDS' responsibilities will include data network design, outsourcing and management services. "We're excited about this opportunity to work with EDS," said Hudson.

Federal Source's Klem also said he was surprised AT&T and Bell Atlantic would pull out of the effort. "It must have been that they didn't get what they wanted," Klem said.

"We feel we could not effectively serve this important customer while meeting our business needs," Barbara Connor, president of Bell Atlantic Federal Systems, said in a statement.

"It just didn't make good business sense for us to pursue it," said AT&T spokeswoman Joyce VanDuzer.

The ViViD contract calls for soup-to-nuts, extremely complex integrated solutions. "This is not AT&T's core business," said Klem. It is, however, exactly what Lucent and GTE do best. "GTE is both a services provider and a reseller of switches," pointed out Klem.