Alcatel, Lucent deal may come Wednesday - sources
By Jessica Hall
Monday May 28, 3:40 pm Eastern Time
PHILADELPHIA - French telecommunications equipment maker Alcatel continued negotiations to buy floundering U.S. rival Lucent Technologies Inc. for about $32 billion (37.25 euros), and an announcement could come on Wednesday, sources familiar with the situation said on Monday.
The two equipment manufacturers, who declined to comment, held negotiations throughout the long holiday weekend and worked to settle details such as what, if any, premium Lucent (NYSE:LU - news) shareholders would receive, one source said.
Under one scenario being considered, Lucent still may distribute its 20 percent stake in Agere to Lucent stockholders, which had been planned under the company's previous spinoff of the optical components and semiconductor business, the source said. It would provide a small premium for Lucent stockholders if they alone received the Agere shares.
While an announcement is tentative set for Wednesday afternoon in Paris, the structure and timing of a deal may change since no final decision has been reached, sources cautioned.
Alcatel Chief Executive Serge Tchuruk would lead the combined company, while Lucent Chairman Henry Schacht would stay for at least a transition period, one source said. The combined company would likely get a new name, rather than taking either the Alcatel or Lucent brandnames, the source said.
The deal will be characterized as a so-called ``merger of equals,'' but sources said Alcatel clearly will be buying Lucent, which posted $4.7 billion in losses in the first half of its current fiscal year.
Lucent, which carries a massive debt load, has fallen behind rivals such as Nortel Networks Corp. (Toronto:NT.TO - news) (NYSE:NT - news) and Cisco Systems Inc. (NasdaqNM:CSCO - news) due to management turnover and product-development missteps.
``It gives Lucent a clean slate to start over, and it gives Alcatel a big foot in the door in the U.S. marketplace,'' said independent telecommunications analyst Jeffrey Kagan.
``Alcatel has made no secret of the fact that they want to become a powerful player in the U.S. telecom marketplace. They have launched an aggressive advertising campaign to increase their awareness in the US marketplace and have very aggressive plans,'' Kagan said.
Alcatel also would gain Lucent's Bell Labs research and development arm, as well as its expertise in CDMA (code division multiple access) wireless technology, switching, transmission, and core network products. The CDMA wireless technology competes with the GSM standard that dominates in Europe.
Alcatel, meanwhile, has strength in edge network products that connect long-haul to local networks, fiber optics, and digital subscriber line (DSL) technology.
A deal would face scrutiny from regulators in Washington, who would examine anti-trust issues. Lucent's Bell Labs also does projects for the U.S. government, which could be vital to U.S. national security. Combining the French and U.S. company also could be fraught with culture clashes and power struggles, analysts have said.
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