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The techno-jumble that would be Lucatel

By Kevin Tolly
Network World, 06/11/01

As I write this, the marriage between Lucent and Alcatel has just been called off.

Let's consider, though, the piecemeal parts that would have combined to make this new company and what impact it would have had on network users.

With only the benefit of my ever-less-reliable memory, I count nine companies, the people, product or technologies that would have been included in the combined company. These are in addition to the nontrivial assets that the companies have developed on their own over the years.

In the LAN switching space, the product mix would include technology from LANNET, Prominet, Packet Engines and Xylan. (Lucent spun off the LANNET and Prominet product lines as part of Avaya last year but some remnants remain.)

For the WAN, Newbridge Networks and Ascend would contribute to the core, while Xedia and Assured Access dealt with the edge. And let's not forget that before Lucent bought it, Ascend gobbled up top-tier frame relay vendor Cascade.

At the physical layer, I'd add cabling vendor Berk-Tek but I can't figure out whether it is still part of Alcatel. Some months back, it started showing up as Nexan. That's when I gave up.

This new Lucent/Alcatel would have been more like a cartel than a company.

Imagine reconciling all those architectures into "a cohesive solutions strategy" (as the new entity's market literature would no doubt say). In your dreams!

The thought of such a company should reveal how patently ridiculous it is to think that "seamless" integration is a realistic goal.

Furthermore, Lucent's pursuit of Alcatel makes no sense from a "strategy" point of view. Think about it. Last year, Lucent boldly announced it was going to spin off "low-growth" units - specifically PBXs, campus switches and cabling.

Now, less than a year later, it aggressively pursues becoming one with a company primarily recognized for PBXs, campus switches and cabling. Brilliant!

While such mergers are always ostensibly done to improve customer value, one as ludicrous as this shows as clear as day the real reason: to boost the stock price.

And what about the price? Just before the talks were called off, the deal was valued just north of $22 billion. A lot of money, right?

Not if you consider that, just a few years ago, Lucent acquired Ascend for about $11 billion. Around this time last year, Cisco handed over some $4 billion in stock for puny load-balancer ArrowPoint - a company that had 1999 revenue of about $20 million. More recently, Nortel paid $7 billion in stock for Alteon Networks - a start-up that had, in essence, one product - a multifunction switch.

Granted, those deals would have dramatically different prices today, but to think that such a prominent part of the old AT&T empire could cease to exist for a number that was anywhere near what a single-product, 3-year-old start-up went for is mind-numbing.

For now, at least, Lucatel executives won't come into being, and the tough questions will remain unasked, but according to some sources, the talks might be revived.

For network managers, though, there is one clear lesson - the myth of "buying from the big guy" to get that guarantee of stability is exposed. Everything is relative, and no company is immune to the vagaries of the market.