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Managing Editor

Lucent, Alcatel rekindle talks

Mar 28, 20062 mins

* Lucent and Alcatel are pursuing a merger of equals

Lucent and Alcatel have confirmed that they are pursuing another “merger of equals,” priced at market, which would make it a $34 billion deal – Lucent has a market cap of $13.6 billion while Alcatel’s is $20.5 billion.

We’ve seen this before. The two companies tried unsuccessfully to merge in 2001 but Lucent walked away when it became apparent the company would be the lesser of two equals.

The companies made no promises that this venture would turn out differently.

“There can be no assurances that any agreement will be reached or that a transaction will be consummated,” they said in a joint statement.

Their hand was forced. As their customers consolidate – AT&T buying BellSouth following the merger of AT&T and SBC, and Verizon buying MCI are two examples – there are less customers to sell to. So equipment manufacturers have no choice but to follow suit to remain viable.

The customer is always right.

Analysts say there are obvious synergies to both companies.

“The key strength of Lucent is its service business combined with its competitive position in IMS infrastructure for next-generation networks,” says Bill Lesieur, director of Technology Business Research in Hampton, N.H. “The key strength of Alcatel is its dominant position in broadband networks, which Alcatel is leveraging to become the leader in triple-play network infrastructure and IPTV solutions. From a wireless network standpoint, Lucent’s strength in CDMA networks fits well with Alcatel’s position in GSM networks.”

Some, however believe the merger will have a tough time passing muster politically with U.S. paranoia about non-U.S. ownership of strategic assets. See Dubai ports debacle…

“The issue of foreign ownership of a U.S. telecom firm may raise concerns that will have to be addressed,” says Jeff Kagan, an independent telecom analyst.

“It will be interesting to see what (if anything) the U.S. Government has to say about the Bell Labs assets,” says Ken Twist, vice president of the technology consulting and broadband networks practices at Ovum/RHK. “Outside of that, we don’t see any major obstacles to this merger.”

Managing Editor

Jim Duffy has been covering technology for over 28 years, 23 at Network World. He covers enterprise networking infrastructure, including routers and switches. He also writes The Cisco Connection blog and can be reached on Twitter @Jim_Duffy and at

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