Optical/IP Networks

Lucatel: Full Steam Ahead

The merger of telecom equipment giants Alcatel (NYSE: ALA; Paris: CGEP:PA) and Lucent Technologies Inc. (NYSE: LU) appears to be on course for completion by the end of 2006, dogged only, sources say, by the struggle to find roles for all the current senior executives and the ongoing disgruntlement of one of the new venture's key individuals. (See Alcatel, Lucent Seal Deal.)

The two companies said in April that the "Lucatel" merger process would be completed in six to 12 months -- between October 2006 and April 2007. Antitrust approval has already been gained in the U.S., with one source close to Alcatel saying the process is "going to plan" and is even "ahead of schedule." Another contact says there is a big push to complete the process by the end of this year so that 2007 can be "clean." (See Alcatel, Lucent Near the Altar.)

The two companies have now applied for an antitrust ruling from the European Union. Its case has a provisional deadline of July 24, when it will either be cleared or subjected to a more in-depth investigation. The E.U., in a document dated June 27, has invited "third parties to submit their possible observations on the proposed operation" by July 7.

So are things going better than expected? Lucatel isn't budging from the official party line, saying only that the merger is on course to close in the October-April timeframe and that further approvals (from various regulators, governments, and investors) are still needed. Oh, and a new name for the combined entity hasn't been decided upon yet.

But not everything is going smoothly, according to an industry source who requested anonymity. He says there "is a lot of politics" and that one of the main challenges for the merger integration teams -- led by a senior executive from each of the vendors -- has been to find roles for all the senior executives from both companies. (See Alcatel, Lucent Name Team.)

Speculation also persists about Alcatel's chief operating officer, Mike Quigley. He was due to succeed Serge Tchuruk as CEO of Alcatel this year, but following the merger announcement Lucent's CEO Pat Russo was named as head of the merged companies, leaving Quigley with the COO badge.

Sources say his relationship with Tchuruk has been strained, and that he is unhappy at being passed over for the top job. Alcatel declined to comment on issues directly related to Quigley, who could not be contacted directly by Light Reading.

In the meantime, Alcatel and Lucent continue to operate as separate companies and launch new products, including those that, arguably, overlap each others' portfolios. One source says both companies' product teams are, naturally, "trying to protect turf" during the merger process. (See Lucent Focuses on Acuity and Lucatel Tightens Grip on Telefónica.)

The Lucatel pair aren't the only telecom vendors embroiled in M&A issues, of course. (See Nokia, Siemens Create Networks Giant, Is Nortel the Old Maid in Telecom M&A?, Who's Going to Buy Tellabs?, and Sonus Looks to Buy & Get Bigger.)

Alcatel's share price currently stands at $12.35, down a significant $3.05, or 20 percent, from the $15.40 price it commanded when the merger was announced on April 2. Lucent's stock is at $2.37, down $0.68, about 23 percent, from the $3.05 price it commanded at that time.

— Ray Le Maistre, International News Editor, Light Reading

chip_mate 12/5/2012 | 3:50:12 AM
re: Lucatel: Full Steam Ahead Huh?
Now they "struggle to find roles"?
Aren't they pretty practiced in this fine art? Haven't they done this tens of thousands of times over the past few years?

Unless, they don't struggle with the worker trash class, just the higher up classes.

Come on, Lucy, just sack 'em and move on!
TheMuffinMan 12/5/2012 | 3:50:06 AM
re: Lucatel: Full Steam Ahead 1. Massive culture clash. US vs the French, new CEO in France who doesn't speak the language. How long will that last? We all know how the French, especially in France, love to speak english all the time.

2. Massive product overlap = Massive layoffs coming on both sides as consolidation of product groups and EOL announcements are made = massively concerned customers.

3. Massive account overlap = Sacked account teams on both sides = customer confusion, and competitor opportunity.

4. This article only talks about the commercial/legal part of the deal, the real pain is still to come from points 1-3. This is just the beginning, the end of 2007 will tell us the real story about this merger.
optodoofus 12/5/2012 | 3:50:05 AM
re: Lucatel: Full Steam Ahead MuffinMan's points 1 and 2 are, I think, closely related. Here's how I figure it plays out. There are going to be way more than 10% layoffs. (If there aren't then there won't be enough cost savings to justify the merger.). That's why they put Pat in charge. Let her be the bad guy, lay off tons of people and bear the brunt of ill will. Then, they blame her for the mess and force her out (with a nice golden parachute). Pat and Rich McGinn hang out together, lounging on big piles of money and reminiscing about the good old days. And, then Quigley gets to run the company. I predict.

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