• United States

Impact of Alcatel, Lucent merger may take time

Apr 03, 20063 mins
Cisco SystemsTelecommunications IndustryVoIP

Businesses wondering how they can benefit from the planned merger between Alcatel and Lucent may have to wait several months until the telecommunications equipment manufacturers hammer out details of their colossal linkup, analysts say.

“The deal is going to take between six and 12 months to clear, and then a couple of years — at the very least — will be needed to integrate the two companies,” says Lars Godell, an analyst with Forrester Research. “This is going to be a very complex undertaking.”

The companies announced plans for the merger, which has been expected for several weeks, over the weekend. Their combined revenue would be about $25 billion.

A key question executives will face along the way is whether the newly combined company should follow the path taken by Lucent, which decided to spin off its enterprise networks business into Avaya in 2000 and focus on delivering equipment and services to carriers, or the one pursued by Alcatel, which continues to deliver a wide range of enterprise systems, including routers.

In a Webcast news conference in Paris on Monday, Alcatel Chairman and CEO Serge Tchuruk and his Lucent counterpart, Patricia Russo, only briefly mentioned enterprise customers in reference to the two companies’ work on developing IMS technology, which defines how IP networks handle voice calls and data sessions, and next-generation all-IP networks. Their remarks were aimed mostly at network operator customers, especially the big global players requiring global support.

Alcatel spokesman Mark Burnworth said it was still “too early” to delve into any details, such as which product lines could be expanded or dropped.

The French manufacturer offers a range of products that target business customers, such as VoIP systems and LAN switches.

With its OmniPCX product, Alcatel is one of the few remaining competitors of Cisco in the market for enterprise routers, according to Jean-Charles Doineau, senior analyst with Ovum, a London consultancy. “And it’s a tiny competitor,” he says.

Of the world’s 500 largest enterprises, 60 are in Europe and around 50 percent of these use Alcatel equipment, according to Doineau. Almost all the rest are Cisco customers, he says.

Even if Alcatel is a small enterprise supplier compared to Cisco, and Lucent is sidestepping that segment of the market altogether, Doineau doesn’t anticipate a significant shift in the combined company’s strategy for servicing business customers. “I don’t think enterprise is an area where we can expect any big changes soon, if at all,” he says.

The sheer size of the combined equipment manufacturers should have an impact on enterprise customers, according to Doineau. “The new company will have a greater capability to offer service, with thousands of people on the ground to serve customers at their locations,” he says. “And the company will be able to throw a lot more at innovation with its combined R&D resources.”

Together, Alcatel and Lucent will have more than 26,000 engineers and researchers and 25,000 patents, according to Russo.