Five years ago, in 2001, when the French telecom equipment ma- jor Alcatel and the US major Lucent wanted to woo each other, it was viewed as a terrific combination. However, the courtship did not materialize and the duo did not disclose the reasons for that. Nonetheless, the two struggling giants have decided to merge finally in a deal valued at $11 bn, leading to the creation of the world's largest telecom equipment manufacturer. "A deal on this scale has been expected for some time, thanks to the flurry of mergers among their customers, particularly network operators in America and Europe", wrote The Economist. However, a more compelling reason, experts say, is the increased competition from the low-cost manufacturer, especially from China. Lucent, (which owns the famous Bell Labs) designs and delivers the systems, services and software that drive next-generation communication networks.
A jubilant Patricia Russo, the lady at the helm of affairs at Lucent Technologies, justifying the merger move, said, "The strategic logic driving this transaction is compelling. The communications industry is at the beginning of a significant transformation of network technologies, applications and servicesone that is projected to enable converged services across service providers' networks, enterprise networks, and an array of personal devices. This presents extraordinary opportunities for our combined company to accelerate its growth." "A combined Alcatel and Lucent will be global in scale, have clear leadership in the areas that will define next-generation networks, boast one of the largest research and development capabilities focused on communications, and employ the largest and most experienced global services team in the industry," gloats Serge Tchuruk, Alcatel's CEO.
Cheering the deal, The Wall Street Journal commented, "Lucent and Alcatel were considered natural merger partners because they have overlapping product lines and different strengths." Nonetheless, cautioning the shareholders and the employees, a few market s say that the deal involves significant risks. Per Lindberg, at Dresdner Kleinwort Wasserstein, claims in an interview with The Economist, "This merger will not work, operationally, strategically or politically I don't believe mega-scale mergers will work in telecoms". |
