Alcatel Chairman: Mulling Small, Medium Buys In U.S.
Dow Jones Newswires
January 21, 1999
PARIS -- Alcatel SA (ALA) is determined to expand its presence in the U.S. and is talking with several small to medium-size U.S. telecom outfits in view of an acquisition, Chairman Serge Tchuruk said Thursday.
"We are in discussions about several acquisitions, but we will avoid an acquisition of the size of Ascend because the risk of losing the key talent is too great," the head of the world's fourth-largest telecom equipment company said at an industry roundtable in Paris.
Tchuruk was referring to Lucent Technologies Inc.'s (LU) purchase earlier this month of Ascend Communications Inc. (ASND), a market leader in high-speed data networking gear, for more than $19 billion in stock.
Tchuruk said he believes Lucent's acquisition of Ascend is fraught with risk because Lucent essentially paid top dollar to buy talent in the form of crack engineers on the cutting edge of their field. There's a chance part of that talent will leave following the deal's completion with the lure of potentially lucrative stock options gone, he said.
Alcatel is itself willing to pay for talent but on a smaller scale to minimize the risk of departures following the completion of an acquisition, Tchuruk said.
"It's difficult for a large company like ours with a limited stock option plan to retain top talent when all people in the field are interested in is stock options."
To illustrate what he believes is the big risk that Lucent took on, Tchuruk remarked that, while the going rate in the industry for acquisitions of start-up telecom companies was $3-4 million per engineer, Lucent paid what amounts to $15 million for each Ascend engineer.
Tchuruk said Alcatel will keep emphasizing the U.S. market as it has in recent years, noting with pride that of all the non-U.S. telecom companies Alcatel has the biggest U.S. presence.
"Our strategy is one centered on the U.S. market - because that happens to be where all the advances in our sector are being made and where the Internet is used the most - and it's one centered on acquisitions," he said.
Alcatel demonstrated its willingness to invest in the U.S. last year, with its acquisition of Texas-based DSC Communications Corp. for $4.4 billion in stock. That one purchase doubled Alcatel's size in the U.S. market.
Alcatel has a substantial share of longdistance digital transmission equipment sales in the U.S. and has been trying to move into local U.S. markets through the sale to regional bell networks of its ADSL equipment-technology that allows consumers to dial up the Internet on conventional lines at speeds that are faster than many corporate networks.
-By John Carreyrou; (331) 53 00 03 03; jcarreyrou@ap.org
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