Today, we offer our insight on the implications of last week's announcement about Alcatel and Lucent's planned merger.The two companies noted in their statement that they had completed "a definitive merger agreement to create the first truly global communications solutions provider with the broadest wireless, wireline and services portfolio in the industry." The combined company "will have an aggregate market capitalization of approximately Euro 30 billion ($36 billion) [and] based on calendar 2005 sales, the revenue of approximately Euro 21 billion ($25 billion), divided almost evenly among North America, Europe and the rest of the world. As of Dec. 31, 2005, the combined companies had about 88,000 employees." The companies aim to create synergies and opportunities in "next-generation networks, services and applications."We think that the merger does indeed offer the combined company synergies in the strengths of their direct sales forces and channels, and that as a merged company it will certainly enjoy market leadership positions in wireless and broadband infrastructures. The companies' strength in broadband access will certainly help the combined company offer more easily integrated digital home services to its clients' consumer markets.We also think that Alcatel's enterprise product portfolio can help in markets where Lucent may have had the upper hand because the line between the enterprise network and the carrier network is becoming increasingly blurred - eventually offering carriers an improved integrated solution for premises-based IP telephony alternatives and other managed services.However as with any marriage, the combined company will need to make some hard decisions about what to keep and what to discard where portfolios overlap. And from an overall product portfolio, the combined company will still not enjoy market share leadership in IP telephony systems. And what looks good on paper will require superb execution to avoid any potential pitfalls that may crop up in cultural and geographical differences. While both companies have each had their share of mergers and acquisitions, execution of a mega-merger of this size will present its own special challenges.In January, we predicted further industry consolidation over the year. Looks like the service providers aren't the only ones that get to have fun with mergers and acquisitions. While we've got our ideas about who is (and maybe who isn't) next, we'll just stick with our prediction that this isn't the last time we'll get to comment on industry consolidation.