Technology

Merger Back on Radar For Lucent and Alcatel

3/24/2006 7:00 PM Eastern

Technology gear giants Lucent Technologies Inc. and Alcatel are in talks to merge their companies in a deal that could be worth as much as $33 billion.

Murray Hills, N.J.-based Lucent and Paris-based Alcatel have confirmed in statements released last week that they are in a merger discussion “that is intended to be priced at market.”

Both companies are major suppliers of telecommunications equipment and software systems, ranging from soft switches to optical networking gear.

Lucent is home to Bell Labs, a mainstay in telecommunications research and development.

“There can be no assurances that any agreement will be reached or that a transaction will be consummated. We will have no further comment until an agreement is reached or the discussions are terminated,” according to the joint statement.

This is not the first attempt at a corporate wedding between the two parties: Lucent and Alcatel had made a previous attempt at a merger in 2001, but that negotiation hit a deadlock over which company would assume the controlling position.

In contrast, the companies are now negotiating a union of equals, despite that with a market value of about $22 billion, Alcatel is a considerably bigger fish compared to Lucent's $12.6 billion value.

Acquiring Lucent would give Alcatel a stronger position on both sides of the Atlantic, in equipment for wireless networks. Lucent is a leading supplier of equipment that handles code division multiple access (CDMA) technology, favored in the United States. Alcatel is strong in global system for mobile (GSM) communications technology and a new “wideband” form of CDMA.

In return, Lucent gets access to Alcatel's extensive lines of optical and video products, American Technology Research analyst Albert Lin noted.

In separate news, Lucent last week gained approval from the U.S. Bankruptcy Court in Delaware to acquire the assets of Riverstone Networks, a supplier of Ethernet routers. Lucent will pay $207 million for the assets following a bankruptcy auction in February.

Adding Santa Clara, Calif.-based Riverstone's products to Lucent's portfolio will strengthen its play in the Ethernet and optical Ethernet market. Analysts have estimated that the carrier-grade Ethernet market will grow from $4 billion in 2005 to $7 billion by 2008.

October