On Feb. 14, 1876 Elisha Gray lost his race to invent the telephone; Alexander Graham Bell put in a patent application just hours before Gray filed one.
Gray, however, had already left his mark on telephony when, in 1869, he and Enos N. Barton formed Gray and Barton, a small manufacturing firm based in Cleveland, Ohio. Three years later, the then Chicago-based firm was renamed the Western Electric Manufacturing Company. By 1880, it was the largest electrical manufacturing company in the United States, noted for its production of a variety of electrical equipment, including the world's first commercial typewriters, telegraph equipment and Thomas A. Edison's electric pen.
A year later in 1881, when the growth of the telephone network was outstripping the capacity of smaller suppliers, American Bell purchased a controlling interest in Western Electric and made it the exclusive developer and manufacturer of equipment for the Bell telephone companies.
In 1907, Theodore N. Vail combined the AT&T (formerly American Bell) and Western Electric engineering departments into a single organization that, in 1925, would become Bell Telephone Laboratories.
In the course of its ongoing research, Bell Telephone Laboratories made several discoveries that would touch the lives of millions in years to come. For example, Bell Labs developed the first commercially viable system for adding sound to motion pictures. Combined with studio and theater equipment manufactured by Western Electric, this system moved Hollywood quickly from silence to sound. In April 1927, the first long-distance television transmission -- from Washington, D.C. to New York City -- was another notable first for Bell Labs.
Ten years later, in one of its most memorable moments, Dr. Clinton J. Davisson became the first of 11 Nobel Prize winners from Bell Laboratories for his experimental confirmation of the wave nature of electrons.
After playing a critical role in providing communications and command equipment for the U.S. military during World War II, Western Electric was able to direct its efforts toward filling the pent-up demand for telephones. In 1946, it produced a record 4 million telephones. Bell Labs directed its research in new areas as well. Three of its scientists received the Nobel Prize for their invention of the transistor in 1947. Bell Labs moved on from there to develop distinguished "firsts" in communications that include the laser, Telstar satellites, electronic switching, UNIX operating system and packet data switching.
Regulation and separation
In 1956, AT&T signed a consent decree to settle a 1949 antitrust suit brought by the U.S. Department of Justice. The decree limited Western Electric to manufacturing equipment for the Bell System and contract work for the government, so Western quickly sold its small non-telephone subsidiary Westrex to Litton Industries and its holdings in Northern Electric (now known as Nortel Networks) to the public. In 1979 and 1980, the FCC conducted Computer Inquiry I and II, which restricted Western Electric from selling enhanced services, except through a fully separated AT&T subsidiary. That subsidiary, American Bell (later called AT&T Information Systems), began operations on Jan. 1, 1983.
In the meantime, AT&T and the Justice Department settled a 1974 antitrust suit, with a modification of final judgment (MFJ) to the 1956 consent decree. AT&T agreed to divest its local telephone companies effective Jan. 1, 1984, and in turn was freed from other 1956 restrictions. As part of divestiture, Western Electric's charter was assumed by a new unit, AT&T Technologies. AT&T Technologies had separate market-focused business units to manufacture and sell consumer products, network systems, technology systems, and information systems.
AT&T Technologies broadened its focus to address the global communications revolution. Before divestiture -- in the late 1970's -- Western Electric formed Western Electric International to undertake projects and joint ventures in Korea, Saudi Arabia, and Iran. Throughout the 1980s, AT&T continued to pursue global markets through direct sales and joint ventures including AT&T Network Systems International, Goldstar Semiconductor, AT&T Taiwan, AT&T Microelectronica de Espana, Lycom, AT&T Ricoh, and AT&T Network Systems Espana.
In 1989, AT&T Technologies branched into several business units, including AT&T Network Systems, AT&T Global Business Communications Systems, AT&T Microelectronics, and AT&T Consumer Products, which would all later combine with Bell Labs to become the original Lucent Technologies. During the 1990s, these business units continued to grow their market leadership in the U.S. and exhibited double-digit growth internationally.
Complexities in the marketplace and within AT&T, however, led to a decision in 1995 to totally restructure the communications giant. In September 1995, AT&T proposed forming three separate, publicly traded companies to serve the increasingly divergent business needs of its customers.
In February 1996, the soon-to-be-spun-off systems and technology unit of AT&T renamed itself Lucent Technologies and launched its separation with an initial public offering of stock issued in April 1996. The spin-off was completed in September 1996 when AT&T distributed its shares of Lucent to AT&T shareholders.
At its launch, Lucent was a major player in mobility, optical, data and voice networking technologies; Web-based enterprise solutions that link public and private networks; communications software; professional network design and consulting services; and communications semiconductors and optoelectronics. From 1996 to 2001, the company completed 38 acquisitions totaling more than $46 billion, including a $24 billion purchase of Ascend Communications, which made Lucent the leading provider of data networking equipment for service providers.
The company spun off its enterprise networking group on Sept. 30, 2000, distributing shares of the new company - Avaya Inc. - to Lucent shareholders. On April 2, 2001, Agere Sytems, Lucent's microelectronics business, completed an initial public offering. Lucent continues to move forward with its intention to separate Agere as a fully independent company from Lucent.
In 2001, Lucent repositioned itself to focus on the world's largest communications service providers and streamlined its portfolio to deliver products and services for the next generation of wireline and wireless networks.
Its research and development arm has remained one of the world's most prolific invention factories with more than 40,000 inventions since 1925. Work under way at Bell Labs is re-defining what is possible in communications with announcements of the first all-optical switch, software that makes Web content accessible by telephone, and a record for the fastest transmission of data over fiber.
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