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Optical/IP

Lucent/Alcatel Rumors Fly

Alcatel SA (NYSE: ALA; Paris: CGEP:PA), which has long been in talks with Lucent Technologies Inc. (NYSE: LU) about Lucent's fiber business, is now in talks to acquire the whole company, according to several published reports.

There are plenty of reasons to be skeptical. For one, Alcatel has been actively shopping around for an American networking company for the past year and has seemed reluctant to pull the trigger. In addition, the deal doesn't have much to entice either side of the bargaining table -- except maybe those who think Lucent needs to be bailed out.

Today's New York Times reported that sources close to Alcatel and Lucent say a deal, if it happens, would be a "nearly all-stock transaction that would represent about a 20 percent premium over Lucent's current value of $33.5 billion." Still, the paper's sources reportedly "described the odds of the deal happening at 50-50."

The Times report kicked off speculation. But today's market activity seems to bear out shareholder distaste for the deal. As this went to press, Alcatel shares were trading at 29.50, down 2.54 (7.93%). Lucent's share price was 10.06, up 0.25 (2.55%). In other words, Alcatel shareholders seem to dislike the prospect and Lucent shareholders either don't believe in a share-price premium or are skeptical of the deal altogether.

Talk of an Alcatel/Lucent merger has persisted ever since Lucent confirmed that it was trying to sell its Norcross, Ga.-based Optical Fiber Solutions Unit (see Lucent's $5 Billion Question) and Alcatel admitted to bidding on it. Indeed, while neither firm will comment on any aspect of the rumors of a full-out merger, analysts say talks have been active for awhile and that they escalated after the recent departure of Lucent's CFO Deborah Hopkins (see Lucent CFO Quits, World Yawns), who they say opposed a merger.

"I think the chance of [a merger] is quite likely, but I don't think it would be a good deal for the shareholders of either company," says Ariane Mahler, analyst at Dresdner Kleinwort Wasserstein. She says overlap between the two firms in all areas would make it tough to gain immediate value from uniting them.

Alcatel has been eyeing Lucent, sources say, to gain more traction in the U.S. market, to widen its influence among U.S. carriers, (particularly the former RBOCs), and to gain access to the rich portfolio of Bell Labs technology.

There's even speculation about a CEO for a new company emerging from the buy: "Krish Prabhu [COO of Alcatel] is talked about as a potential head of the new company. He has already been approached for the CEO jobs at Lucent and Nortel," says Mahler.

But observers say there are significant obstacles. Some point to the risks Alcatel would take in acquiring a company with many strategic and financial problems, including massive debts and mounting losses. Much depends on the potential terms -- and that could be the sticking point in the talks.

"I know the CEOs are talking. But every time Lucent gets the price up the deal gets derailed. Cash is tight at Lucent. At $10 or $11 a share, there's no premium," said one industry source with connections to Lucent, who asked that name and firm be withheld. Indeed, the market, pricing Lucent's stock at $10.20 on the news, did not appear to handicap a premium into the current price of the firm's shares.

And there may even be regulatory issues, given that both companies own sizeable shares of specific segments of the worldwide telecom equipment market, such as ATM equipment. Carriers may object to further consolidation of a market that already has a limited number of top providers.

Alcatel has recently established a pattern of acting acquisitive and then backing down -- almost always because of concerns about the price or due diligence issues at the potential acquiree. In the past year, Alcatel's said to have been in talks with a range of companies, including Alidian Networks Inc., Astral Point Communications Inc., Geyser Networks Inc., Tachion Networks, and Zaffire Inc. (see Alcatel Seeks to Buy Optical Startup). Nothing's come of any of these talks so far.

There's also a chance that another Lucent suitor may emerge. Nokia Corp. (NYSE: NOK) and Siemens AG (NYSE: SI; Frankfurt: SIE) are both said to have considered bids. Also not to be discounted are the potential buyers of Lucent's fiber unit, which include Pirelli SpA and a range of Japanese companies.

Neither Lucent nor Alcatel will comment on any aspect of the rumors. And the bottom line seems unclear. As one analyst put it, "There are too many rumors to know what's right..." Still, some are hedging their bets. "I'm not sure this would provide any value for shareholders. In fact, I'm thinking about taking my target price down [on unspecified figures for both ALA and LU]," says Ariane Mahler.

- Mary Jander, Senior Editor, and R. Scott Raynovich, Executive Editor, Light Reading
http://www.lightreading.com
tycon03 12/4/2012 | 8:22:44 PM
re: Lucent/Alcatel Rumors Fly I think this merger talk is a ploy to get a discounted price for the OFS Business Unit. Alcatel is notorious for making verbal pitchs to companies and then backing out at the last moment. I don't think the US government would allow a French company to merge/takeover Bell Labs. BL has done too much work for the US government and they might deem it a threat to national security to allow Alcatel to assume control of the R&D arm of Lu. I think if OFS is sold and a few more contracts are won Lu can be on the road to recovery. The Lambda seems like a tremendous product and if all goes well with Global Crossing Lu will be a leader in optical networking. One must give them credit for being first to market with MEMS technology. I know people like to bash Lu but fact of the matter is they still have some great talent left and they are winning contracts left and right, if you are in for the long I think LU is a good bet, but the shorts are getting killed and they are the ones ripping the company. The Lambda is Lu's ticket bak to the top. The next few months should be very, very, interesting.
gladysnight 12/4/2012 | 8:22:55 PM
re: Lucent/Alcatel Rumors Fly At http://knowledge.wharton.upenn...

there's quite a good discussion of the idea of an ALA/LU merger (or acquisition).

One thing mentioned was the example of the Daimler Chrysler acquisition (ie NOT a merger) but I felt that one thing they left out was that the DC deal did not add any value whatsoever.

On the contrary the merged entity ended up with the same value Daimler had before it acquired Chrysler, effectively valuing the acquired Chrysler at zero. Any LU and ALA shareholders should take warning from this example. OK, I'm not saying telecoms and motor vehicles are directly comparable as industries, but the two deals face very similar challenges to a successful consummation.

YMMV
gladysnight 12/4/2012 | 8:22:56 PM
re: Lucent/Alcatel Rumors Fly "Perhaps you'll be telling me next what I'm going
to have for breakfast tomorrow?!"

- Electric Cool Aid? Perhaps you'll be eating your worthless Amazon share certificates . . . they probably provide more nutritional value than financial!

"How is your message related to the Lucent/Alcatel
merger??"

- You tell me, you're the one who claims that ALA is "cheap" at 23 times earnings.

"Only an idiot would buy a stock based solely on
P/E. One of the characteristics of rapidly
growing technology stocks is a relatively
high P/E anyway. This is fundamental stuff that
you can read in any book."

- mm, and probably worth what you paid for it. Oh, the divine confidence of people who've lived through the longest running bull market in history. Just my opinion, but the carnival is over.

btw, what does "relatively high" actually mean? You've still avoided the question, I note, although implying that anyone who disagrees with you is an idiot was a neat distraction.

If 23 times is cheap then what multiple is not cheap? 40? 50? 80? 223?

If you're going to make these statements then you ought to be able to defend them sensibly. So, is it then your contention that ALA is one of these "rapidly growing tech stocks" that you mention?

Because to me it looks like an old and tired, overly fat and contented, protected by the state in its home territory, retirement home for failed entrepreneurs.
It seems to completely lack any of the characteristic features of "rapidly growing tech stocks" . . . .

imo
SoftwareBoy 12/4/2012 | 8:22:58 PM
re: Lucent/Alcatel Rumors Fly "If the ALA merger doesn't happen now... then it will definitely look bad for LULU."

Absolutely. The thing is so stupid on its face, that you have to wonder about secondary motives. Namely, is Lucent such a train wreck that the execs are simply looking to bail out, grab their golden parachutes and then blame future chaos on Alcatel? You know, "We feel Alcatel has seriously mishandled the merger...." blah blah blah, and other self-serving BS that Lucent execs are so good at spouting.

"80-20 they are merging folks!
Any takers?"

Nah. I might go in at 50-50. Too many problems. Too many regulatory hurdles.

Actually, it may come down to Alcatel getting most of Lucent, with certain parts spun off or sold off to meet market share guidelines. (Hey Henry, sell the VitalSuite stuff to Micromuse! The Vital guys would LOVE to be out from under your incompetence anyway.)

But overall, I just don't see how tossing together two dinosaur companies with monopoly mindsets is going to help anything. Hell, Lucent STILL hasn't integrated Ascend into its corporate structure (the six guys that are left from there). How the hell they going to merge with Alcatel? From a process/backoffice point of view alone it's a disaster.

My final comment on this merger is a musical one. Mr. Sondheim, please cue up the CD....

"Something appealing,
Something appalling,
Something for everyone
A comedy tonight!"
rafaelg 12/4/2012 | 8:23:00 PM
re: Lucent/Alcatel Rumors Fly Damn if you do...
If the ALA merger doesn't happen now... then it will definitely look bad for LULU. SEE #17 if needed. 80-20 they are merging folks!
Any takers?

:-)
fatchance 12/4/2012 | 8:23:03 PM
re: Lucent/Alcatel Rumors Fly LU would do better to sell their parts on Ebay rather than join Alcatel. Cisco has a better track record in buying firms and getting value from them. They would add a needed management infusion and a culture that may be more forward looking than they currently have. This would avoid some product overlap and a bloodbath in NJ from layoffs.
johnjohn 12/4/2012 | 8:23:05 PM
re: Lucent/Alcatel Rumors Fly talks with cisco would be a better shot in the arm for the troops. alcatel has no clout in the states.
manoflalambda 12/4/2012 | 8:23:06 PM
re: Lucent/Alcatel Rumors Fly Well, one of the worst BoDs in America (see Fortune mag), decided to look into this --

http://www.app.com/news/app/st...

*sigh*
Manoflalambda
wildcard 12/4/2012 | 8:23:08 PM
re: Lucent/Alcatel Rumors Fly No why should they.
ng_mui 12/4/2012 | 8:23:13 PM
re: Lucent/Alcatel Rumors Fly >The 52 week range on the stock is 26.6 to 86.25.
>Are you really suggesting that a fall of that
>many points is not a crash?!?

You can see the stability I mentioned if you
compare the stock with the Nasdaq composite, and
others like Cisco, Nortel, Lucent over a 1 year
period.

Of course it followed the general trend of the
Nasdaq composite, but wasn't exposed to the
same magnitude of devaluation as the other
companies I mentioned in the sector in Jan/Feb
this year.
ng_mui 12/4/2012 | 8:23:14 PM
re: Lucent/Alcatel Rumors Fly >Really? So at what level above 23 times earnings >does it become not cheap?

Only an idiot would buy a stock based solely on
P/E. One of the characteristics of rapidly
growing technology stocks is a relatively
high P/E anyway. This is fundamental stuff that
you can read in any book.

>Are you REALLY telling us that you've bought ALA >stock and plan to wait 23 years to recoup your >investment? Or are you just saying that you've >bought stock on the latest dip and now want to >talk it up again?

No, I'm not saying that at all. If I wanted to
to that, posting messages here would be a
completely stupid way to go about it!

>Next you'll be telling us that JNPR is cheap at >83 times earnings and CSCO is cheap at 50 times

Perhaps you'll be telling me next what I'm going
to have for breakfast tomorrow?!

How is your message related to the Lucent/Alcatel
merger??
gladysnight 12/4/2012 | 8:23:19 PM
re: Lucent/Alcatel Rumors Fly "Alcatel's fundamentals are good: earnings
growth from last year is just under 100%, with
a very low P/E of around 23. . . . . that it was never overvalued in the first place. Right now it
looks cheap!"
====================

Really? So at what level above 23 times earnings does it become not cheap? Are you REALLY telling us that you've bought ALA stock and plan to wait 23 years to recoup your investment? Or are you just saying that you've bought stock on the latest dip and now want to talk it up again?

Next you'll be telling us that JNPR is cheap at 83 times earnings and CSCO is cheap at 50 times . . . .

yeah, right.
jay shah 12/4/2012 | 8:23:28 PM
re: Lucent/Alcatel Rumors Fly any idea what is happening to these two stocks ?
RSTN is touching new high everyday, DIGL approaching its own high soon...
Seltzer 12/4/2012 | 8:23:30 PM
re: Lucent/Alcatel Rumors Fly Is it a typical practice these days for pre-IPO companies to accelerate vesting of stock options as part of a severance package ?
skeptic 12/4/2012 | 8:23:31 PM
re: Lucent/Alcatel Rumors Fly Alcatel's fundamentals are good: earnings
growth from last year is just under 100%, with
a very low P/E of around 23. The reason it
didn't crash with the North American stocks has
nothing to do with its position in the US market,
and more to do with the fact that it was never
overvalued in the first place. Right now it
looks cheap!
--------------------
The 52 week range on the stock is 26.6 to 86.25.
Are you really suggesting that a fall of that
many points is not a crash?!?

Its back in a trading range that it was at in 1997 (before it spiked way up and crashed in '98).








ng_mui 12/4/2012 | 8:23:44 PM
re: Lucent/Alcatel Rumors Fly Alcatel's fundamentals are good: earnings
growth from last year is just under 100%, with
a very low P/E of around 23. The reason it
didn't crash with the North American stocks has
nothing to do with its position in the US market,
and more to do with the fact that it was never
overvalued in the first place. Right now it
looks cheap!

I agree that both companies are fat right now, and
I expect a complete clean-up of any merged entity
with the redundant divisions shut down and others
sold or spun off into separate companies. I
would start feeling a bit nervous if I was working
for either company!

Lucent's recent troubles are the best thing that
ever happened to Alcatel.
NetPig 12/4/2012 | 8:23:50 PM
re: Lucent/Alcatel Rumors Fly IMHO Alcatel are looking at Lucent purely from the perspective of Lucent's customer base. They could really give a crap about Lucent's technologies but need a way into core U.S. customer base. For many loyal die hard Lucent customers's the Lucent spin (if/when it happens) that Alcatel is the savior they have been waiting for is just what they are dying to hear. Lucent HAD a history of innovation (actually Bell Labs not really Lucent) but as with many companies the guys in pin stripes infect from the top and urinate down and over anything they are not comfortable with. This possible merger is Lucent's last hope also as Wall Street knows the deal with Lucent (i.e there is no beef as the farmers have left the building) For the pin stripers, Alcatel is their last chance to retain anything close to what they have been used to. However, knowing Alcatel it will be a blood bath for them as the French execs in Alcatel actually drink their own KoolAid and beleive know one knows better than them knows how to run a networking company.
deadbeef 12/4/2012 | 8:23:52 PM
re: Lucent/Alcatel Rumors Fly Several top executives have stated over the past year that the CSD (Core Switching Division) is the future of Lucent - and in fact is what they are counting on for growth going forward.

This is pretty scary in light of the fact that the CSD has pretty much lost all of its experienced developers. Does Alcatel know this? Does Henry know this? I doubt it.
skeptic 12/4/2012 | 8:23:53 PM
re: Lucent/Alcatel Rumors Fly This will further Alcatel's strategy for complete
vertical integration in the telecom market -
which has worked, ALA stock price didn't collapse
like some in the market have.
--------------------
Huh? Have you looked at the long-term chart
for ALA? Sure, they are not quite as bad as
the north american companies, but I would still
call how far they are off their high a collapse
(high 80's back to the 20's at one point).

The thing that is helping them the most is lack of exposure in north america. Which says something negative given the billions they have
spent trying to expand in north america.

I agree about the cherry-picking you identified at Lucent, but you might as well put all of
alcatel's current north american operations (
former DSC, Xylan and Newbridge in particular)
in the trash at the same time. Then you might
have a good company.


gladysnight 12/4/2012 | 8:23:53 PM
re: Lucent/Alcatel Rumors Fly For anyone who's labouring under the misapprehension that the merged entity would have 200K employees - forget about it.

It would rapidly get rid of some 80K of those, at least, given the product overlaps. More could be possible, since neither company is exactly stripped down as it is.

If it was up to me I'd make it 120K to go, and keep the 80K, maybe less.
fk 12/4/2012 | 8:23:53 PM
re: Lucent/Alcatel Rumors Fly Hey, the Xylan acquisition worked for me! The options went from being worth not a whole lot to being worth serious (if not lifechanging) cake. It was actually pretty hard to walk away from with unvested options on the table, because every month their vested worth was (at the time) more than double my monthly salary.
ng_mui 12/4/2012 | 8:23:54 PM
re: Lucent/Alcatel Rumors Fly This acquisition makes perfect sense for Alcatel.

Lucent is stuck for money, and needs it before
September. Alcatel have a lot of capital after
the Optronics IPO and nowhere to put it.

Why not buy Lucent, and integrate the cherries
into Alcatel:
- Bell Labs (can't have too many propeller heads)
- Fiber division (which will bring Alcatel to
number 2 in the market after Corning)
- Wireless division

Then put all the rest of Lucent's trash along
with their management in a single company and
sell it off.

This will further Alcatel's strategy for complete
vertical integration in the telecom market -
which has worked, ALA stock price didn't collapse
like some in the market have.

The Alcatel CEO Serge Tchuruk is positioning
himself as the next Jack Welch with this merger.
NetPig 12/4/2012 | 8:23:56 PM
re: Lucent/Alcatel Rumors Fly Lucent Beware? We all know Lucent has a perfect record when it comes to integrating acquired companies. I know of at least two small companies that viewed a Lucent acquisition as the "Kiss of Death". (Ask PE, Yurie, Cajun, Chromatis etc...) While I canGÇÖt/won't defend Alcatel it just goes to show that a good old American bureaucracy CAN stifle innovation as well as large companies whoGÇÖs management were all brought up on Socialism.
skeptic 12/4/2012 | 8:23:57 PM
re: Lucent/Alcatel Rumors Fly What, are we going to speculate on every single acquisition Alcatel has made in the US over the past couple of years? If so, my bet is on DSC. Most of the post-Alcatel-acquisition grousing has been from (ex-)DSC employees. This has been especially evident on the Yahoo board. The other acquisitions seemed to do pretty well for the employees of the acquired companies.
-----------------------------------------

Which acquisitions have been positive? Certainly not packet engines (total disaster) or xylan. Many of the old rockwell people left in huge numbers a couple years ago now as well. The east coast units (whats left of them) are not happy
places from the people I've talked to either.

I suppose you are talking about newbridge? I would say thats too soon to tell. Who else is
there (in recent times anyway).

lightsoul 12/4/2012 | 8:23:57 PM
re: Lucent/Alcatel Rumors Fly >The other acquisitions seemed to do pretty well >for the employees of the acquired companies.

from my experience, I don't think PacketEngines guys agree with you, its same there too, may be in Xylan also...
lightsoul 12/4/2012 | 8:23:58 PM
re: Lucent/Alcatel Rumors Fly New Bridge...?
fk 12/4/2012 | 8:23:58 PM
re: Lucent/Alcatel Rumors Fly What, are we going to speculate on every single acquisition Alcatel has made in the US over the past couple of years? If so, my bet is on DSC. Most of the post-Alcatel-acquisition grousing has been from (ex-)DSC employees. This has been especially evident on the Yahoo board. The other acquisitions seemed to do pretty well for the employees of the acquired companies.
let-there-be-light 12/4/2012 | 8:23:58 PM
re: Lucent/Alcatel Rumors Fly A few days ago, I saw some scenes in a re-run of Carl Sagan's classic TV documentary series, "Cosmos".

He was explaining the difference between white dwarves, neutron stars, and black holes. As he explained, when a star ends gets old and runs out of energy, it can end up in three different ways, depending on how big it was to start off with. The smaller and medium-sized stars end up as white dwarves and neutron stars respectively, but the really big stars collapse into black holes, since there is nothing to withstand the enormous crushing force of gravity.

So what's my point? Actually, I have two..

First, the way Lucent and Alactel are circling each other almost seems like the meeting of two black holes in space. 200,000 employees worldwide, and not much opportunity for revenue generation (except maybe submarine and DSL for a few years)? Sounds like a disaster waiting to happen.

Secondly, I'd like to introduce a longer-term perspective to the discussion here. In a few billion years time, I don't think anyone will be getting too excited about all this. On a cosmic scale, who cares whether millions (billions?) of dollars were wasted, opportunities missed, unnecessary golf courses built, corporate jets misused, thousands of families' lives disrupted through layoffs, etc. etc? Shouldn't we be grateful we are living in peaceful times? This is the American (maybe that should read French?) way of life!

Good Luck to all involved in this mess, including even the management of Lucent. I know it's tough in there Henry..
grass_stain 12/4/2012 | 8:23:59 PM
re: Lucent/Alcatel Rumors Fly Bzzzt. Try again.
lightsoul 12/4/2012 | 8:24:01 PM
re: Lucent/Alcatel Rumors Fly (are)were you part of Alcatel's Xylan or Packet Engines...?
fatchance 12/4/2012 | 8:24:01 PM
re: Lucent/Alcatel Rumors Fly Both LU & Al. are floating ballons on a merger to see if the market cheers or barfs. Problems a' plenty re: product & cultural mix, FTC and EC approvals, Nortel & Seimens rolling over. Of corse if the deal looks dumb enough the competition will remain silent hoping two weak firms tie themselves up trying to get a merger to work before failing (NCR?). LU needs cash but what will Alcatel get and at what price. They'd be paying more than a dot com to get eyeballs. How will customers react?? I think most telcos would be hard pressed to see how they benefit from this merger. My guess is in the end we'll see a parts sale, the whole enchalada doesn't compute.
rafaelg 12/4/2012 | 8:24:03 PM
re: Lucent/Alcatel Rumors Fly Rather than exagerate and let our opinions grab a foothold, we should look at the facts.
1 LU is hurting for money.
2 D. Hopkins wanted to sell LU as parts. "OH HENRY the Ricky II" wanted to sell LU as a whole or dump 1/2 of it.Guess what appeals to H.S.?
3 Alcatel has lots of $$$$ but no stong presence in the US. An antonym for LU.
6 The FTC eventually would approve the merger after negotiations. If LU and AL begin talks.
7 Alcatel is one of the few that could come up with the cash.(And actually wants to buy LU).
8 The stock would increase in value. (Cash v.s. No cash)
9 They both have the same style of management; ease of transition.

I agree that duplication of product lines is an issue. However, what big company CEO hasn't acquired a startup with duplication of equipment in some areas? It would give both companies a chance for "loosing weight"



grass_stain 12/4/2012 | 8:24:04 PM
re: Lucent/Alcatel Rumors Fly Alcatel have a history of damaging US data networking companies they buy with their European micro-management. Don't take my word for it. Take a look at the acquisitions in the last 5 years and see how may new products have come out of them and how many pre-acquisition engineers are left. Alcatel suck the life out of engineers with their need for tight control and abundance of paperwork, lack of knowledge of the data networking business, their lack of knowledge of the US engineer psyche, their lack of vision, and their total focus on the mediocre. Their attitude and actions result in a morale train wreck followed by steep attrition and then unexperienced new hires/inter-company transfers to keep the headcount up. Lucent beware.

At the same time, they are experts in all things telephony, and their A-Team in Europe would walk all over what ever Lucent have in the US. They look after their own.

Alcatel have some very very smart engineers in Europe, and if you see a resume from one of these guys, don't dismiss it.

But they also have managers in Europe. Senior managers with egos on their own little quests who think that 10 year projects are viable in the Internet age. Bureacrasy is king. It doesn't matter if you never produce as long as you have a paper trail to explain where all the money went.

If a project is worth doing, it's worth doing for years until it's cancelled.
Pseudopersonality 12/4/2012 | 8:24:05 PM
re: Lucent/Alcatel Rumors Fly Most people seem to have missed the big picture on this merger concept and have strayed into the emotional side too much.

I don't think that this "deal" is going anywhere IMHO.

The stockholders for LU, especially the ones holding expensive shares, would not accept it and they're probably the majority.

Besides, where is the good old American spirit to overcome adversity and win against all odds instead of giving up?

Pseudo



gardner 12/4/2012 | 8:24:06 PM
re: Lucent/Alcatel Rumors Fly Whether or not the Lucent/Alcatel deal is a good thing or a bad thing I feel I must respond to some of the silliness being spouted as if it were incontrovertible fact in this forum.

Skeptic tells us:
------------------------------

Alcatel's (unknowing) strategy is usually:

1 - Buy a reasonably good company in north america.

[... litany of nonsense deleted for brevity ]
5 - Shut the north american company down.
-----------------------------------------------

Easy to say but I'm a bit skeptical of your "facts" skeptic. Would you care to give some examples of this happening? Which North American companies have been shut down? What technology has been transferred to Europe and then sold to the captive customers? Did you just pull this out of the air or do you have some facts, dates, names to back it up? I didn't think so.

skeptic 12/4/2012 | 8:24:06 PM
re: Lucent/Alcatel Rumors Fly What will Alcatel get? For starters, a wireless infrastructure business that Alcatel is failing to develop on its own. Also a terrestrial optical transport business that well complements Alcatel's undersea business (ALA has struggled to extend its domain to the land but has been unsuccessful). And a real (albeit deteriorating) ATM switch.
------------------------------------
Alcatel will destroy each and every one of these
if it buys them. Alcatel, as a company, cannot
function most of the time in a competitive or
leading-edge technology environment. They do best selling to their captive customers and their whole attitude is based on the fact that many of their customers will buy from them regardless of what they have to sell.

In terms of ATM, buying Lucent would give alcatel perhaps three or four internal units selling ATM gear.

Buying Lucent does make some sense. But if it were my call, I would buy Lucent and then shut down the entire current north american operations of alcatel.

Alcatel's (unknowing) strategy is usually:

1 - Buy a reasonably good company in north
america.
2 - Transfer the new companys current
technology to europe where to alcatel's captive
customers, its going to be bleeding edge.
3 - Sell the new companies products, but dont
invest in new products at that company. Keep
the operation going selling the current products
until europe has successfully transfered the
technology and created a matching product.
4 - start selling the european developed products
to the captive customers.
5 - Shut the north american company down.

There are good reasons alcatel is failing in
certain businesses already. And any new company
or product they buy will fail for the same reasons.





johnjohn 12/4/2012 | 8:24:08 PM
re: Lucent/Alcatel Rumors Fly this merger (acquisition) does not get me excited, especially as a lucent employee. just think of all the redundancy. will a company of that magnitude (200K) be able to execute in a dynamic industry?
getrealdotcom 12/4/2012 | 8:24:10 PM
re: Lucent/Alcatel Rumors Fly Boy have you hit the nail on the head. Alcatel's purchase of DSC was bad for employees and customers. Alcatel still has some good talent left but it lost a huge amount of experienced people and put many unqualified (some anal)people in decision making rolls. The experienced folks tolerate it until something better comes along. They micro-manage from France and haven't a clue about U.S. market needs or employees needs. They have proven they can buy U.S. companies and destroy them, this deal would be no different except on a larger scale. They also move the cream of development work back to Europe. If Lucent wants to survive they either need to sell off some parts or find a better buyer that appreciates the talent they buy. At Alcatel management is their biggest problem and it will require massive changes to fix (need to clean house on a large scale).
moneyfornothing 12/4/2012 | 8:24:11 PM
re: Lucent/Alcatel Rumors Fly What will Alcatel get? For starters, a wireless infrastructure business that Alcatel is failing to develop on its own. Also a terrestrial optical transport business that well complements Alcatel's undersea business (ALA has struggled to extend its domain to the land but has been unsuccessful). And a real (albeit deteriorating) ATM switch.

THe geographic cost saving potential is strong, as each is spending to build share in the other's backyard.
gladysnight 12/4/2012 | 8:24:12 PM
re: Lucent/Alcatel Rumors Fly "Management is absolutely the issue. What would Alcatel gain by owning Lucent?" - Payaya.


Absolutely. But, more to the point: what would the shareholders (of either side) gain?

Nothing.

LU shareholders would swap hidebound AT&T lifers for hidebound French civil servants.

AL shareholders would have their comfortable statist existence disturbed by unpleasant market realities in a market (relatively) un-subsidised by captive taxpayers.

On either side, this deal would be a total disaster. Cultural mismatches, massive product overlaps (my quick guesstimate says ~80%), severe marketing problems, dangerous financial condition of both parties, the list goes on . . . .

Marrying two such struggling entities together is a concentration of risk that is not merited by any potential reward.

Hopefully this idea will die the quick death it so richly deserves.
Payaya 12/4/2012 | 8:24:14 PM
re: Lucent/Alcatel Rumors Fly Management is absolutely the issue. What would Alcatel gain by owning Lucent ?
manoflalambda 12/4/2012 | 8:24:16 PM
re: Lucent/Alcatel Rumors Fly Good question.

I heard Alcatel and Lucent own most of the total DSL market (ADSL and SDSL), with Lucent's Stinger having Alcatel chips. Lucent now has a shipping OXC. Probably lots of OEO Sonet gear overlap in Xcons and DWDM...

Salute,
Manoflalambda
John Honovich 12/4/2012 | 8:24:16 PM
re: Lucent/Alcatel Rumors Fly With re: to proposed LU - Alcatel deal, how much of their product lines would overlap? I am thinking from ATM switches to DSLAMs to MSPPs to Class 5 switches, there would be huge redundancy.

It doesn't seem that these companies complement each other well. Any thoughts?
melao 12/4/2012 | 8:24:18 PM
re: Lucent/Alcatel Rumors Fly Bell Labs is not a disaster. Lucent's problems has more to do with management than products.
Their portfolio is awesome.

Sometimes i think people in this forum are new to the telecom market.
alglin 12/4/2012 | 8:24:28 PM
re: Lucent/Alcatel Rumors Fly
Lucent IS a total disaster.
Not sure if the fiber optic division
is a good deal, either.

optical 12/4/2012 | 8:24:30 PM
re: Lucent/Alcatel Rumors Fly An Alcatel - Lucent deal with be a total diaster!!! Buying the optical fiber piece is a good deal, but all of LU, that's a loser.
flanker 12/4/2012 | 8:24:30 PM
re: Lucent/Alcatel Rumors Fly The FTC will not approve it.
leer 12/4/2012 | 8:24:30 PM
re: Lucent/Alcatel Rumors Fly In light of the current telecommunications market and economy, the merger of Alcatel and Lucent makes emotional sense. Decisions of this magnitude are made based on emotions and then justified with logic. I predict by the end of June a deal will be announced.
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