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Alcatel, Lucent Face Security Grilling

Representatives from Alcatel (NYSE: ALA; Paris: CGEP:PA) and Lucent Technologies Inc. (NYSE: LU) have been called to a hearing organized by the House Armed Services Committee to answer questions about the national security implications of their proposed merger. (See Alcatel, Lucent Seal Deal.)

The hearing, organized by the Committee's chairman, Republican Congressman Duncan Hunter, and scheduled for 2 p.m. on Tuesday, November 14, in Washington, D.C., comes as the vendors make their final plans to become one giant telecom equipment supplier. (See Alcatel Preps New Tech Roadmap.)

The Committee's members are expected to hear testimony from representatives from the vendors and officials from the Committee on Foreign Investment in the United States (CFIUS), which has been reviewing the proposed merger. However, a list of "witnesses" due to speak at the hearing has yet to be announced. (See Alcatel/Lucent Wait on W OK.)

At the heart of any security concerns is the role of Lucent's Bell Labs , which does a lot of U.S. military-related work. Lucent has addressed this situation by planning for the Labs to become a separate subsidiary in a post-merger world, though questions have already been raised as to whether that will be enough to satisfy the concerns of some U.S. lawmakers. (See Analyst: Alcatel Should Rethink Things.) The vendors should prepare themselves for a challenging session next Tuesday. Congressman Hunter, who represents California's 52nd Congressional District, has already made his feelings clear about the proposed merger. Only weeks after the vendors announced their intentions to join forces, Hunter wrote a letter to President Bush saying that he had "several grave concerns about the potential merger of French-owned Alcatel and American-owned Lucent Technologies.”

He added: "These concerns arise in large part because Lucent Technologies and Bell Labs, a critical component of the parent company Lucent Technologies, conduct a significant amount of highly classified work for the United States government, including the Department of Defense. I am skeptical whether the current CFIUS process could provide adequate, verifiable assurances that such sensitive work will be protected.”

The vendors are keeping their thoughts about the hearing to themselves, at present. "We have heard from the Committee and have their request under review," says Lucent spokeswoman Mary Lou Ambrus, while Alcatel issued an identical statement.

Investors clearly aren't worried that the hearing might scupper or delay the deal. Alcatel's share price is down just €0.08, less than 1 percent, to €10.33 in Paris today, while Lucent's stock is up 1 penny to $2.53 in pre-market trading this morning.

— Ray Le Maistre, International News Editor, Light Reading

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SolitonWave 12/5/2012 | 3:35:14 AM
re: Alcatel, Lucent Face Security Grilling Guess I've heard all this before. Security issues are always a good excuse to hide some other concerns... Alcatel is based in Europe, not Iran or North Korea. It should not be that hard to reach an agreement on security issues. Unless there are other "not so clear" motives to raise questions.
paolo.franzoi 12/5/2012 | 3:35:13 AM
re: Alcatel, Lucent Face Security Grilling

Well, Alcatel + Lucent would be the clear #1 most important Telecom company in the US. Cisco is the clear #1 Internet company.

Things like CALEA can be worked but relationships are not always as friendly as one might think.

seven
whyiswhy 12/5/2012 | 3:35:12 AM
re: Alcatel, Lucent Face Security Grilling JMHO:

Congressman doofus brain ought to be seriously worried about HuaWei-3Com.

-Why
digits 12/5/2012 | 3:35:12 AM
re: Alcatel, Lucent Face Security Grilling Oui. Je conviens, monsieur.
markjohn20 12/5/2012 | 3:35:12 AM
re: Alcatel, Lucent Face Security Grilling I think this is an issue not of merger with a European company, but of merger with a company of 'cheese eating surrender monkey' extraction :) Perhaps the neo-cons still haven't got over French opposition to their adventure in Iraq....
megacop 12/5/2012 | 3:35:09 AM
re: Alcatel, Lucent Face Security Grilling Hey seven,

I'm a wee bit confused.
Vendors are responsible for making sure CALEA is in their product, so the telcos can meet the requirement. CALEA is an absolute requirement in these parts ....

MC
whyiswhy 12/5/2012 | 3:35:09 AM
re: Alcatel, Lucent Face Security Grilling Duncan Hunter...

Did one of his parents lose a Yo-Yo?

-Why
chip_mate 12/5/2012 | 3:35:08 AM
re: Alcatel, Lucent Face Security Grilling To be blunt on the Security Vote:

Is Alcatel run by Muslims?

Yes or No.




Vote is decided.




End.
paolo.franzoi 12/5/2012 | 3:35:06 AM
re: Alcatel, Lucent Face Security Grilling
MC,

Think a french company that will own half the switches in the US (or probably more than half) is going to be keen on implementing changes to help support the Patriot Act? Now replace the word french with foreign. Now think about all the communications in your country flowing through the equipment owned by a foreign power.

Get the idea now? As I said, CALEA will be easy.....but just suppose the French want to spy on the US.

seven
paolo.franzoi 12/5/2012 | 3:35:05 AM
re: Alcatel, Lucent Face Security Grilling
njguy,

French CIA: Put a bug in the next patch so we can listen to all US phone calls that pass 5ESS switches anytime we want.

Alcatel: Okay...

Get the idea? That is the reason it is a security risk.

seven
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