Alcatel SA (NYSE: ALA; Paris: CGEP:PA) can't stay out of the headlines this week. Even as merger talks with Lucent Technologies Inc. (NYSE: LU) collapsed, Alcatel was readying a burst of financial news and reportedly telling analysts it may yet buy Lucent's fiber business.

"They won't say so publicly, but privately Alcatel has stated that they're still talking to Lucent about buying the fiber business," says a European investment banker, who asked that his name and affiliation be withheld.

This morning, Alcatel's CEO Serge Tchuruk told analysts and press in a conference call that he could not comment on any of his company's dealings with Lucent, although "I'd like to."

For its part, Lucent confirms that it's still entertaining bids for its Norcross, Ga.-based Optical Fiber Solutions Group. But spokeswoman Michelle Davidson declined to confirm who the bidders were or to say whether Alcatel's among them.

Initially, Alcatel's bid on Lucent's fiber group -- confirmed by Tchuruk without a specified amount -- was the instigator of talks between the two companies. Those talks escalated into an attempt at a full-out merger, then collapsed yesterday (see Alcatel, Lucent Throw in the Towel).

But after this week's events, analysts say they're questioning whether buying Lucent's fiber business would be a wise move for Alcatel or a positive one for its investors. That's in part because Alcatel's released a string of financial caveats between last night and this morning.

At first glance, these announcements seem confusing. As one analyst put it, "They're confusing because Alcatel's confused." Here are the highlights:

Analysts are not surprised by all this but they're treading cautiously. "Overall, management did not highlight any new risks that are not already well known to investors," wrote Tim Anderson, VP at Salomon Smith Barney in a research note today. "We recognize the news from Alcatel is not positive and it is likely to weigh on the shares over the next several days."

Going forward, Alcatel says it's buttressing its latest actions with an openness to future consolidation moves, but that it isn't hunting them down. The company also hopes to continue to build up its U.S. presence by selling carriers a range of core networking gear, including DWDM, ATM, and softswitch products.

Would buying Lucent's fiber business help the U.S. push? Not likely, some analysts say. "I think the market reaction would be negative," said one European analyst. "The fiber business is in a downturn. And Alcatel hasn't proven itself to have a good acquisition strategy. The latest merger talks with Lucent bear this out. And with these announcements they've written down the value of previous acquisitions, such as Xylan and Internet Devices."

At press time, Alcatel shares were trading at 25.18, down 2.23 (8.14%).

- Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com