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Mergers & acquisitions

Rumor Mill Boosts AlcaLu

The late August heat appears to have warmed up the telecom equipment sector rumor cauldron, with Alcatel-Lucent (NYSE: ALU) at the heart of the speculation.

According to this Reuters report, there's talk in the stock trading community that an unidentified Chinese company might bid for Alcatel-Lucent.

Even in telecom vendor fantasy land, only two Chinese companies -- Huawei Technologies Co. Ltd. and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) -- could even contemplate a bid for AlcaLu, and it's hard to imagine that any potential move would get further than first base.

Just for fun, though, imagine that Alcatel-Lucent and Huawei did tie the knot -- to form Hualcalu, of course. Harking back to 2008's full year revenues, such a combination would create the world's biggest telecom systems supplier. (Check out our vendor rankings table in this story: Huawei Closes In on Rivals.)

Extraordinary though the suggestion might be, it helped, along with an upgrade on the stock by analysts at French equities research house Natixis, to give AlcaLu's share price a 12.8 percent boost to €2.78 (US$3.95) on the Paris bourse. If it ends the day at that mark, that'll be its highest closing price of 2009.

A price of €2.78 gives AlcaLu, which recently reported revenues of €7.5 billion ($10.67 billion) for the first half of the year, a market capitalization of €6.44 billion ($9.16 billion). (See AlcaLu CEO Pitches Recovery Story.)

It's worth noting at this point that AlcaLu's share price has sunk as low as €0.87 this year. But with general economic trends turning more positive, and carriers expected to spend the lion's share of their annual capex during the second half of the year, it's likely that AlcaLu's shareholders can expect their holdings to increase in value between now and 2010.

But talk of Chinese interest in Alcatel-Lucent isn't the only M&A talk involving the vendor giant. One equities trading house believes AlcaLu should consider merging with Nokia Networks , according to this Reuters story, a suggestion that would no doubt excite the giant dealmakers that would need to broker such a deal, but send many others to the bar for a treble measure of something lethally strong.

Alcatel-Lucent, as you'd imagine, isn't commenting on the speculation.

All other suggestions for head-turning M&A combinations are most welcome on the message boards below -- the more laughs the merrier!

— Ray Le Maistre, International News Editor, Light Reading

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digits 12/5/2012 | 3:58:03 PM
re: Rumor Mill Boosts AlcaLu

Never mind all the other issues associated with a combined AlcaLu and Nokia Siemens -- what the devil would you call it?


Nokalu?


Alcanosi?


It just wouldn't work....


I'm kinda hoping that Sonus buys Nortel's carrier VOIP, because I want to at least say "that Sonortel!"


I also like the sound of Junilabs (Juniper + tellabs), or even


Motomen (if Motorola decided to get into optical and bought Nortel's MEN division).


It's all in the name for me.... 

Sterling Perrin 12/5/2012 | 3:58:02 PM
re: Rumor Mill Boosts AlcaLu

Ray,


I wonder if shareholders would like the ring of No-Si-A-Cent?


Sterling

rickaty 12/5/2012 | 3:58:02 PM
re: Rumor Mill Boosts AlcaLu

Most likely, a chinese company is trying to buy ALUs very profitable Undersea cable business. That is a standalone unit that would command a significant price from another company. Does ALU consider this business core ? Or would they rather have the cash.

MarcSpirent 12/5/2012 | 3:58:01 PM
re: Rumor Mill Boosts AlcaLu

Dear Ray,


I guess you're overspeculating as Reuters just mentioned a possible bid for the Voice/Data/Video business, which probably means one AlcaLu division and not the whole company. Anyway good for shareholders. BR, Marc


 

paolo.franzoi 12/5/2012 | 3:58:00 PM
re: Rumor Mill Boosts AlcaLu

 


Okay if you take away all the data, voice and video business that means that service is left?


 


seven


 

Mark Sebastyn 12/5/2012 | 3:57:59 PM
re: Rumor Mill Boosts AlcaLu

<nm>

paolo.franzoi 12/5/2012 | 3:57:57 PM
re: Rumor Mill Boosts AlcaLu

 


sailboat,


I think there were several points here, there and everywhere about specific businesses being sold off by ALU.  That probably makes some sense, as a way of focusing the business.


Now, if the buyer is Chinese I would think that Enterprise would not be what is purchased.  It certainly would be a new business for them and would cause quite a stir, but seems to be quite far away from where the Chinese are now.


 


seven


 


 

^Eagle^ 12/5/2012 | 3:57:57 PM
re: Rumor Mill Boosts AlcaLu

Brook, while from a high level view you are probably right about the "what is left?" comment; on a granular or more technology specific level, in my mind, this comment would emply that ALU wants out of enterprise.  Enterprise voice (pbx's), enterprise video, and enterprise based routing and switching (remember they still have all those remnants of LAN businesses: XyLan ethernet switches for instance.. not to mention several others).  I see this as ALU wanting to get rid of the equivalent of Avaya like Lucent did all those years ago.


What they would be left with is big infrastructure projects products: Optical transport and switching and routing (long haul, metro, submarine, et al), PON, Wireless infrastructure, Carrier Routing and switching (ethernet), various SS7 key platforms and products, etc.


In short, focus on telecom in all it's forms for transmitting what ever kinds of bits or bandwidth over wireless and wireline.  Get out of the enterprise.  And perhaps some core video services and servers that they are not leaders on anyway.


just my two cents quick thoughts.  Would be most happy to hear your thinking in reply.


sailboat

photon2 12/5/2012 | 3:57:54 PM
re: Rumor Mill Boosts AlcaLu

Boy, if you are correct, and ALU enterprise is up for sale along with Nortel enterprise, isnt' this a good time for Juniper to jump in a maybe take a bit to expand their enterprise?


P2

millomar 12/5/2012 | 3:57:51 PM
re: Rumor Mill Boosts AlcaLu

Chinese OEMs buying Alcatel-Lucent or even parts of Alcatel-Lucent...  Why?  What would unlisted Chinese businesses get from the deal?  As far as I can see the key motivation for businesses like Huawei and ZTE is the employment of Chinese.  They expand their businesses so that the can employ more locals.  They are pretty good at that just by shipping product.  Market share is booming without any acquisitions.  They don't appear to be in the business to report a profit or to get a good return on assets or any of the other standard measures of Western business.  If they were to buy A-L would this let them employ more Chinese?  I don't see it.  Their management don't appear to be driven by ego.  Neither of the major Chinese OEMs seem to lack technology so that's not a reason either.  Further there is very limited experience for these guys in acquiring other businesses.  So they would dip their toe in the water with a super huge acquisition?  Get serious.


As for an NSN + A-L tie up.  Two ordinary businesses do not make a strong business.  Ask anyone who joked that the "-" in Alcatel-Lucent was actually "minus."  I expect that there was similar thinking on the NSN side.


But composing a name for the merged entity?  Priceless.

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