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Technology Stocks : Alcatel (ALA) and France -- Ignore unavailable to you. Want to Upgrade?

To: zbyslaw owczarczyk who wrote (3293)	5/21/2001 3:12:15 AM
From: pat mudge	Respond to of 3891

WSJ article on LU-ALA take-over possibility: >>>>>>>>> May 19, 2001 -------------------------------------------------------------------------------- THE SKEPTIC: Alcatel Better Off Looking Beyond Lucent By ROBB M. STEWART A DOW JONES NEWSWIRES COLUMN (This story was originally published Friday) LONDON -- Is Alcatel (ALA) about to make a very costly mistake? Even the suggestion Alcatel could go ahead with an offer for ailing Lucent (LU) cost the French telecoms group a sharp drop in its share price. And rightly so. According to JCF Group figures, Lucent sits on a forward EV/EBITDA of 47.4, compared with only 11.4 for Alcatel and 21.9 for Cisco Systems (CSCO). It's EV/Sales ratio is 1.44 against Alcatel's 1.34. So even with the almost 80% slump in Lucent's shares over the last year, it still doesn't look cheap. There's also the question of whether Alcatel shareholders will be willing to fund the more than $40 billion acquisition, reported by the New York Times. A bid, the NYT said, would be made mostly in stock and would represent a 20% premium to Lucent's price Thursday. The companies have declined to comment on the newspaper's report. Investors, meanwhile, have a host of other concerns - product overlap, regulatory reaction, differing management cultures - causing them to balk at the notion of a bid. There's also the U.S. reaction to consider. Lucent holders there might reject or be forced to offload French paper, causing at least some flowback of shares. That would weigh on Alcatel's price. And the timing may not be right for Lucent, surely preferring a bigger premium to a higher stock price once it follows through on plans to offload businesses. But don't throw the baby out with the bath water. There are benefits in taking over a company such as Lucent, particularly the attraction of the diving deeper into the U.S. market. The U.S. already accounts for 22% of Alcatel's sales, and the company has said it wants that to grow. There's also the promise of a much bigger R&D department; as often noted, the shelf-life of "new technology" is limited. Plus, there's the likelihood of economies of scale and a broader portfolio by adding Lucent's businesses. Then there is timing. The fall in Lucent's shares might attract other suitors, at least for its fiber optics unit, which many consider the business Alcatel covets most. It's said as many as four suitors, including Alcatel, have expressed interest in the unit already. Alcatel currently sits in a stronger position than many of its rivals, with a net debt-to-equity ration of below 30% and plans to sell some non-core assets, though it hasn't escaped the downturn unscathed. Earlier this week, a $1.1 billion contract was suspended with 360 Networks (TSIX), in which Alcatel holds $700 million worth of convertible bonds. Since the companies won't comment, at this stage it all remains theoretical. But considering the high risk, and the immediate pressure on Alcatel's shares, it appears the downside outweighs the benefits. This could turn out to be a far bigger buy than Alcatel can profitably digest. Far better for it use its position of relative strength to seek out other targets offering similar benefits as Lucent, but with less risk. Given the state of valuations in today's market, these opportunities may just surface. >>>>>>>>>>

To: zbyslaw owczarczyk who wrote (3293)	5/21/2001 8:33:50 AM
From: elmatador	Read Replies (2) \| Respond to of 3891

Why ALA needs to buy LU. "From 1997 to 1999 (Serge Tchuruk) raised $10 billion by selling off Alcatel's electrical equipment, nuclear power, and other industrial businesses. He used the money to make acquisitions in North America, chiefly last year's $7.1 billion purchase of Canada's Newbridge Networks, a deal that made Alcatel a major player in ATM switching." fortune.com The problem now is that techstocks nose-diving. The prospects of the Old Economy look brighter. A company such as Siemens, that kept the bits that Serge Tchuruk sold -to raise money to buy US telecoms companies- is poised for a better future. Alcatel has the sole option of sticking to being a telecommunications company. That's why ALA needs to buy LU.