The Day that Bell Labs Died -- an explanation

The Day that Bell Labs Died

(with appologies and credit for inspiration to Don McLean)

A long, long time ago I can still remember how Bell Labs would
make me smile,

• Bell Labs has a long and valued history. Many people who retired or otherwise left in 2001 from Lucent R&D actually Joined "Bell Telephone Laboratories", originally a separate company half owned by AT&T and half by Western Electric, AT&T's manufacturing arm. Bell Telephone Laboratories had ALL the R&D for the old AT&T, but in the various restructuring, most people got reorganized into product development teams, eventually under Lucent Technologies.

• In June of 2001 Lucent offered a voluntary early retirement incentive package to everyone 45 years old or older. The deal was you got 5 years added to age and service, which meant many people could retire and collect an immediate pension. Also, you qualified for the maximum company contribution to your medical benefits. The "stick" in the approach was that if you stayed, your company contribution to your retirement medical expenses was capped, generally at a lower level, and you faced the risk of being layed off in lucent's ongoing downsizing. People had a month (June 11=July 10) to decide, and had to be out of the building by July 13 (Originally the date was July 11, but they pushed it back to the 13th (a friday!) "to promote an orderly transition")

• During the year leading up to this Lucent made the financial news almost weekly with yet more bad news. The whole Telecommunication industry was sick, but Lucent was unlucky enough to have been financially weak to begin with when the industry went ino a tailspin.

• Lucent/Bell Labs had a company savings plan, allowing employees to set aside salary money in a tax deferred account, since long before congress created the 401K. What was sad was that many people from the Bell System days put all their tax deferred savings into company stock (first AT&T, then Lucent), even though all advice ran against it. Lucent stock slide from a price of $80/share to about $6 over the year preceeding the retirement offer.

[Chorus]

Bye, bye to the telecom guys
sent a message to the network but the network had died.
Them good old boys all took 5+5
saying this will be the day bell labs dies,
this will be the day bell labs dies.

• The "good old boys" (more than a few of them women) were a collection of lucent employees who for many years enlivened a set of internal company discussion group using the netnews/usenet software. Many of these people took the "5+5" offer. The offer was not the first early retirement offer, but probably was the one clearing out most of the original pre-1984 divestiture employees who joined Bell Labs

[Verse 2]

Did you build a 5E load
and have you emailed on the road,
if your boss once told you so,

• "5E" is 5ESS, Lucent's flagship switching product, and load building meant compiling and integrating the more than 10 million lines of source code that was included. A guru task, but a common one. Emailing on the road was common for Lucent's sales force and systems long before email became a universal business tool

• Circuit switching was lucent's forte and I expect will be in loose long after all of us are gone, but in the late 1990's and 2000 the industry was so enamored with packet switching and voice over the internet that it was felt there would be no role for circuits. Unix is of course a contribution of Bell Labs, as was stopping light in a research laboratory.

• Rich McGinn was Lucent's flamboyant CEO during it's glory years in the late 1990s, and concluded several huge deals (Ascend, Excel, Yuri, and many more) that were worth billions and brought data networking products and expertise to Lucent, and accolades from Wall Street.

• "MTS" stands for Member of Technical Staff", the title most bell labs and R&D people held. There were ranks of MTS, but the title was well respected and used by everyone.

[Verse 3]

Now for 5 years we've been on our own,
our stock is sinkin like a stone
but that's now how it used to be,

• Lucent was separated from AT&T in 1996, 5 years before the stock sunk into the single digits (after 2 2-1 splits, to be fair).

• Henry Schact was brought in to lead Lucent during it's early days, and did a masterful job of building the company and pitching it to Wall Street, which was so enamoured with Lucent it drove the price to $80/share (again after 2 2/1 splits from an initial price of $27/share).

• Rich McGinn was Henry's understudy, a long time employee of Lucent/AT&T who had a dubious track record including running AT&T's computer business into the ground. In truth I can't say Rich McGinn had much to do with the downturn, but his drive for growth perhaps lead more than a few people to overextend credit, advance report sales, and push to build products with a dubious market.

• One of McGinn's more dubious ventures was putting $45 Million into building a private 36 hole golf facility for executive customer entertainment. When Lucent turned down, it became embarassing and Henry Schacht ordered the facility sold. Oddly enough it was sold at a profit.

• As lucent got serious about saving cash, we got directives to save energy and people went around pulling bulbs out of overhead fixtures. The gloomy lighting matched the mood.

[Verse 4]

Helter Skelter in a summer swelter
our shares collapsed just like an old bomb shelter,

• Well -- where I live (west of Chicago), we had one of the hottest summers on record that year, and you just try to find something that rhymes with "swelter".

• One memo circulated internally indicated other economy measures including mowing lawns only once a month and many more absurd measures. I never knew whether this was real.

• Deb Hopkins was lucent's CFO, brought in by Rich McGinn in part to clean up the mess created by questionable sales reporting. This she did, but she left almost a year to the day after joining, with many speculating it was over differences in how to handle the company, and that she had wanted to be much more agressive in negotiating sales of lucent's product lines and assets.

• Every employee of lucent recieved options on 100 shares (400 after splits), in 1996, and most received what would become another 400 shares in 1998. Many received options recognizing accomplishments or for retention, some on thousands of shares. The lucky ones excercised their "founders grant" options before the stock collapsed, but with few exceptions the other options were worthless by the time they became excercisable. Lucent kept issuing new options at lower prices, even after the 5+5 retirement offer, but the stock kept on falling because of worsening market view on it.

• In May of 2001, after months of speculation, lucent came close to a merger with Alcatel, then it fell through. It was billed as a merger of equals, but when Alcatel clearly wanted control, Lucent backed out. two months later one of my colleagues observed that Lucent and Alcatel still had roughly the same market value, each half of what it was in May.

[Verse 5]

Oh and there we were all in a fix,
a generation got deep sixed,
with no time left to start again,

• Most of the people taking the 5+5 offer were between 45 and 55, older employees already having been cleared out through earlier deals. Many of these folks needed to find new jobs, but faced a bad market and few options.

• As lucent was downsizing, rumor was Rich McGinn was in France, deliberately avoiding returning to the US to avoid becoming a target for disgruntled employees and stockholders.

• For much of the downturn, the only real plan apparent was to cut spending. It took Lucent too long to make the tough decisions about which products to keep and which markets to stay in.

• As noted above, the Alcatel deal could hardly have been expected to do much good.

• John Chambers, CEO of Cisco, had a running fued with Lucent in the press, with Chambers painting lucent as "old world". This fueled the market frenzy over migration of all communication to packet, which drove some less than sound business decisions by carriers and vendors like Lucent to aggressively persue replacement strategies with little sound economics behind them. Student's of arcane lyrics will of course note that the coresponding line in the original was about satan.

[Verse 6]

I met a girl who posted news
and I asked her for some inside views,
but she just smiled and turned away,

• No reference to anyone in particular here, but the Lucent retirees did set up their own discussion groups and struggled to stay informed on what was going on in the company, and in contact with those in the company, even though about 2 weeks afterwards Lucent apparently blocked access to the retiree discussion group from Lucent's intranet.

• 20 years earlier I was one of the first who installed the "netnews" software, creating a backbone of unix machines in Bell Labs and several other companies and universities, that eventually grew to over 20,000 groups and universally supported on the internet. Maintaining the news service inside of Lucent was always clearly a skunkworks project, and one fear I had was that with so many people leaving it was sure to collapse. Only time will tell.

• In the rush to get everything on the internet, many were saying that phone service was passe, though public internet based telephony was still very immature. I could well envision a world where browsing and email were easy, but good quality voice service was unavailable developing on that premise.

[Chorus Twice]

Something tells me my second career won't be in songwriting, but it's been, and that's what matters most.