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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belakinabale 12/5/2012 | 3:34:42 AM
re: Alcatel, Lucent Face Security Grilling ... at the grilling? Did not see any new supply of french fries :) on lightreading.
corwin0 12/5/2012 | 3:34:46 AM
re: Alcatel, Lucent Face Security Grilling Brookseven,

I have thought about it - the USG access to coms channels is most probably NOT in commodidty hardware (think about how many people have access to those platforms).

If it were in those platforms, the operators would most definately notice the data outflows (it would be their bandwidth being used, afterall, unless you assume that there is some tachyon/graviton emitter hidden in those circuit packs).

The access, if it exists, is somewhere else.
zoinks! 12/5/2012 | 3:34:47 AM
re: Alcatel, Lucent Face Security Grilling I guess you're right. I shouldn't worry about French muslims or Europeans.

I should worry about China stalking my navy, training to torpedo the fleet right before it marches on my relatives in Taiwan.

opticalwatcher 12/5/2012 | 3:34:47 AM
re: Alcatel, Lucent Face Security Grilling "This makes me wonder where all of the code that is being generated in Bangalor is going."

Exactly. People here are worried that a French company is supplying all this teleco equipment to the US (though much of it is US based Timetra).

A lot of the Lucent, Cisco, and Alcatel code is being written by low-paid programmers in India and Asia.

In any case, the US government couldn't care less.

The concern is Bell Labs, which does specific classified research for the US government.
whyiswhy 12/5/2012 | 3:34:47 AM
re: Alcatel, Lucent Face Security Grilling "That wouldn't be possible without major cooperation from the service provider, for sure. In effect, it would double the total interface size of the PSTN, for one thing..."


It's public information as long as 40 years ago the US was listening in on most of the USSRs military and diplomatic traffic from microwave to undersea cable to wires to coax...

Read a few books about how it was done very efficiently and automatically years ago (before anything like word recognition), and imagine the US government has spent a billion every year since getting better and better at it...

zoinks! 12/5/2012 | 3:34:48 AM
re: Alcatel, Lucent Face Security Grilling > I just think it's funny how you can go through all kinds of trouble to keep total control of muslims in your country,...

I'm not sure what country you're talkin' about fella, but it ain't the US. Political correctness and "sensitivity" run amok is in charge.


Zoinks!, he with a healthy sense of xenophobia for those that want to kill me because I am a Christian and an American
megacop 12/5/2012 | 3:34:48 AM
re: Alcatel, Lucent Face Security Grilling
This makes me wonder where all of the code that is being generated in Bangalor is going.
paolo.franzoi 12/5/2012 | 3:34:49 AM
re: Alcatel, Lucent Face Security Grilling


Perhaps you should look at the exactly 2 vendors with a 99% share of telco switching. There are many car makers.

As for LCDs, go find who makes LCD panels. You will find that 90%+ market share is owned by Japanese companies. Given that this is considered a critical military technology the DoD is keeping some American Suppliers in business. Otherwise that market share would be 100%.

metroman 12/5/2012 | 3:34:49 AM
re: Alcatel, Lucent Face Security Grilling Seven

Of course everyone sources goods from multiple places/vendors/distributors - it makes sense to do that to spread risk.

Lucent and Alcatel merging does not make the US dependent upon that merged entity to supply anything. They can choose to ignore them as a commercial partner in favour of an entity that they trust. Given that we live with free market economics no-one is forced to do anything or be dependent upon anyone - even the Japanese LCD suppliers.

By the way, an Australian dominates our media, the car market is dominated by the Japanese and Viagra is made by a british company. Be careful driving home, watchihng the news or in bed with the wife/husband tonight, who knows what they are doing to you.

Fear is easy to create. Trust is a little harder to come by these days, hence the number of Lawyers.

CoolLightGeek 12/5/2012 | 3:34:50 AM
re: Alcatel, Lucent Face Security Grilling Seven wrote to Bytewatcher: "I don't consider it paranoia. You are being spied on through the Internet. It's okay with me. "

Lets call it non-intrusive monitoring of internet chatter: I doubt anyone(NSA/CIA?) has collected specific information tied to our ROW friend, bytewatcher, unless of course, he distinguished himself by researching terrorist organizations or b*mb making chemistry on the internet.

"Spying" typically implies a intrusive effort with a idea of a target in mind. I would bet a fair number of farmers that use ammon**m n*trat*
get on the list of people for special attention.

The DoD considers security concerns as primary even if it leads to more expensive solutions.
Its one place where basic capitalism (lowest bidder meeting spec) gets overridden if there is any thought that the bidder can be compromised by a group perceived as a security risk.

I expect ALA/LU will do what it takes to pass the "security grilling".

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