Lucent Technologies

Lucent Technologies, spun off from AT&T in 1996, became one of the biggest casualties of the dot-com crash. The telecom equipment maker was worth $275 billion at its peak before declining to under $5 billion by 2002. Aggressive revenue recognition, over-financing of customers who couldn't pay, and the telecom infrastructure buildout collapse combined to destroy the company. The mechanism failure was channel-stuffing creating illusory growth. Lucent financed customer purchases through vendor loans, recognizing revenue on equipment customers couldn't afford. When the telecom bubble burst, those loans defaulted and Lucent faced simultaneous revenue collapse and credit losses. Lucent merged with Alcatel in 2006 in a combination of weakness rather than strength.