After a somewhat tumultuous start here, the Spokane operation of Paris-based Alcatel S.A. has secured its role within that multi-billion-dollar company and apparently, for some time to come, its future in Spokane.


When Alcatel acquired Spokane-based Packet Engines Inc. in December 1998, initial reports indicated that the operation would retain the Packet name and possibly double its workforce here to 400 people. Bernard Daines, Packets founder, was expected to stay on as CEO of the Spokane operation.


Within months, however, Daines had left the company, and by the end of last year, lawsuits, which still are pending, had been filed against Alcatel by Daines and by a group of former Packet employees. Meanwhile, Packets sales force was relocated to other Alcatel offices, and its manufacturing operations were moved to California, leaving only a research-and-development center here that many speculated might not survive.


Although little has been heard from Alcatels Spokane operation since, its secure in its future here, says Greg Eitzen, vice president of engineering here. About 100 engineers are working at the companys Spokane Valley office, at 11707 E. Sprague, on testing and maintaining current products, developing new ones, and providing highly technical support. Those are the kind of jobs economic-development boosters here have been scrambling to attract.


Earlier this year, Alcatel also decided to re-establish a business-operations division at the Spokane office to oversee a regional sales force of about 30 people here and a sales-support team.


The French company said in its third-quarter results, released Oct. 31, that its carrier-networking business segment, of which the Spokane operation is a part, showed the greatest growth in sales and operational income among all of the companys segments.


By working on the data side (of networking), thats where the growth is, and that means the Spokane office is positioned in the proper place within the company, Eitzen says. And theres no doubt that Alcatel is headed in the right direction.


Data networking


Alcatel, among other things, is a telecommunications company that specializes in building next-generation networks that deliver integrated end-to-end voice and data-networking solutions worldwide.


The data-networking side of the businesswhich is the Spokane operations area of expertiseis split into two main categoriesthe enterprise group, which caters to corporations that operate internal networks, and the carrier-networking group, which caters to telecommunications providers.


Spokane has a leg in each group, Eitzen says.


The Spokane office deals mainly with data networking for the carrier-networking group. A regional sales force also operates out of the Spokane office, although, it sells products for the enterprise group.


In total, the Spokane office manages, tests, markets, provides sales support for, and services a family of products thats on the market now; develops new products; and develops and markets intellectual property. It also sells Alcatel products to government clients nationwide and to commercial customers in 15 states, including the Pacific Northwest and California, Eitzen says. He adds that the Spokane sales force currently employs 33 people, and the company plans to add another five people to that sales force by the end of the year.


The intellectual property developed and marketed here consists of whats called soft core, which Eitzen describes as the programmed brain of a computer chip. The intellectual property group here is a leading provider of soft cores, which are used by other companies that make chips used to perform media-access control functions involving fast Ethernet and gigabit Ethernet.


Serge Tchurck, Alcatels Paris-based CEO, said in the companys recent earnings statement that Alcatels record performance in the third quarter is underlined by further strong advances in data- and optical-networking sales, which together combined for an 88 percent increase.


The French company reported net income of $249.7 million (all dollar figures have been converted from euros) for the third quarter, compared with $69.8 million for the year-earlier period. The company reported sales of $6.6 billion for the third quarter, up from $4.4 billion in the year-earlier period.


Looking ahead to 2001, we expect continued solid expansion in our carrier-networking and optics businesses driven by submarine and terrestrial transmission, core-data networking, and broadband wireline and wireless access, Tchurck says.


That bodes well for the Spokane office, which plays a pivotal role in the area of core-data networking, which involves helping telecommunications providers enhance the central pieces of their networks, Eitzen says. The operation here is responsible for one of three product lines that are in that area of core-data networking. That product line is whats called the OmniCore/PowerRail product, which initially was developed by Packet Engines. The product is a routing switch used to direct the flow of information in data networks.


Engineers here also are developing larger and faster products that would allow more data to travel through major telecommunications networks, which are seeing overall traffic doubling every four to six months, Eitzen says. He declines to provide further details about the new products for competitive reasons.


Packet beginnings


Alcatel, which has excelled in developing voice-switching products, bought Packet Engines because of a desire to expand into the data-networking side of the business, Eitzen says.


Now the company is able to leverage both, which puts them in the perfect position because of the convergence of voice and data that were seeing in the market right now with voice over IP and such, Eitzen says.


Packet Engines was started by Daines and moved to Spokane from Union City, Calif., in 1995. The company, at the time it was sold to Alcatel, had been making a repeater, which controls how information is transmitted through a computer network, and the PowerRail routing switch. The repeater product has been discontinued, but the PowerRail routing switch still is being manufactured by Alcatel at one of the companys plants in Calabasas, Calif., Eitzen says.


Eitzen, who joined Packet Engines about nine months before the company was sold to Alcatel, says Packet Engines went from being a young startup with a complete business to being integrated into the mature company of Alcatel. As part of that transition, the jobs of Packet employees who performed duplicated functions were moved to other locations within Alcatel, causing some people to relocate. Other employees simply left because they werent comfortable with the transition from a startup to a mature company, he says. He adds that about 40 percent of the Spokane operations current employees were employed by Packet Engines before it was sold.


The recently re-established sales-support team here serves other Alcatel sales forces in the U.S. to sell the products developed here.


Basically, the real core knowledge (about the OmniCore/PowerRail) is here in Spokane, Eitzen says. The sales-support team is responsible for providing training to the sales engineers in our front-line organizations and providing backup support by sending support team members to customer sites with sales-team members to help during sales calls.


That new division is being headed by Helge Dahl, who was born in Norway and most recently lived in Belgium. Dahl is one of between 15 and 20 employees here who are taking part in an exchange program through the company. Dahl and his counterparts had worked for Alcatel in Europe, but have been given the opportunity to work for the company in the U.S. Employees here also have the opportunity to work in Europe, Eitzen says.


The U.S. has been at the forefront of the development of data networking, Dahl says, adding that the exchange program gives Europeans a chance to increase their knowledge about it.