Alcatel, Lucent in merger talks

Alcatel, Lucent in merger talks

	Published : Fri, 24 Mar 2006 14:15 By : James Rowe Print this Story

NEW YORK: U.S. telecom equipment maker Lucent Technologies Inc. and French company Alcatel SA are talking on a merger of equals. The companies confirmed they are in negotiations and any deal arrived at will be without any premium to the existing stock prices. A merger will see the formation of a company with a combined market capitalisation of $34 billion.

The two companies released a statement saying they are engaged in discussions about a merger of equals that is intended to be priced at market. However, there can be no assurances that any agreement will be reached or that a transaction will be consummated, the statement added.

The two companies, rivals in their operational fields, had been in talks earlier, but Lucent withdrew as Alcatel had then put forth the idea of an acquisition rather than a merger of equals. Alcatel was then keen on taking over Lucent's fibre optic business.

Lucent refused to comment on the nature of talks or to give details.

Both the companies have been experiencing dwindling sales and falling profits after 2001, when the dotcom ventures floundered and the telecom segment experienced one of its worst crises due to want of orders.

Lucent reported that its current first quarter revenue had fallen by 12 per cent to $2.05 billion. Alcatel has, however shown better results. Its fourth quarter revenue rose 7 per cent to $4.95 billion.

It has recently won large contracts for setting up media and communications infrastructure for services such as internet-based TV and video. If the merger takes place, Alcatel will be able to leverage on Lucent's strengths in CDMA wireless technology as well as its standing in the U.S. as a strategic system supplier to telecoms companies like Sprint Nextel and Verizon Wireless.

According to sources close to the negotiations, Lucent Technologies chief executive Patricia Russo is likely to be the chief executive of the merged company. Alcatel's chief executive officer Serge Tchuruk, who had spent a decade in the company in turning it around, will be retiring this year. The two companies will have equal representation on the reconstituted board.

Analysts believe the unified company could pose a stiff challenge to market leader Cisco and Stockholm-based Ericsson.