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A second look at ‘Lucatel’

May 01, 20063 mins
Mergers and AcquisitionsNetworking

A few weeks back when the Alcatel-Lucent merger news broke, I thought for a moment I’d encountered a time warp. Five years ago, I wrote in my column that a proposed merger of the companies was a bad idea.

I can’t remember any other merger that was put on hold for that amount of time. Of course, Lucent, Alcatel and the world of technology have changed dramatically since then. This time I’m on board, for the same primary reason that most analysts cite – the need to be bigger to compete effectively in the carrier market.

What I’ve been looking for is any indication of how this new company will approach the enterprise. I haven’t seen the kind of focus that, say, a Nortel is making there. But maybe the merger will change this.

Today, most companies focused on the carrier market also find ways to package their offerings for high-end enterprise deployments or scientific and clustercomputing applications. Whatever it does with the carriers, the new company should leverage its brand and try to improve its standing with enterprise buyers. With many new companies developing components or stand-alone network products – but having no name recognition or market clout – it is a perfect opportunity for the big guys to act as an OEM of top-notch technology. The big guy gets new gear to sell with little or no R&D; the little guy gets sales it could never close on its own.

But what about culture? Most analysts cite concerns over merging the two corporate cultures. Few of these analysts remember these companies have probably been through more merger shock than most others.

While both have been quiet on this front of late, when the two were discussing a merger in 2001 they were in the process of trying to digest a slew of companies between them.

I’m sure that I’ve forgotten some, but the list includes Ascend (which had previously gobbled up Cascade), Assured Access, Newbridge Networks, Packet Engineers, Prominet, Xedia and Xylan. Some have long been repackaged and spun off or deactivated, but from an internal perspective, this merger would likely be easier.

Lucent had swallowed up several Israeli firms, and Alcatel did the same with several U.S. firms, so even those corporate culture differences should be nothing new.

If I were Pat Russo, the Alcatel CEO-in-waiting, my biggest worry would be Paris in the spring. Not the weather, but the riots. The government and big employers are in a quandary because of France’s traditional stability when it comes to employment.

With all due respect to any French citizens who might read this, French workers seem to want it all – stability and opportunity. Well, it can’t happen. You can’t make room for eager, well-educated workers if you can’t sweep the nonperformers off the payroll.

France’s social structure and its inflexible laws related to work are even more constricting than Germany’s, a country known for powerful blue- and white-collar unions.

It is going to be hard for the new company to be as nimble as, say, Siemens – which in itself is a tough thing to imagine. Note to Russo: Enjoy the weather while you can.