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

To: zbyslaw owczarczyk who wrote (3403)	5/31/2001 1:52:06 AM
From: elmatador	Read Replies (2) \| Respond to of 3891

"Weakness has spread to its US ADSL business, and to Europe; the submarine business is dead in the water." Lex: Alcatel/Lucent Published: May 30 2001 19:43GMT \| Last Updated: May 30 2001 19:46GMT Financial Times The collapse of merger talks between Alcatel and Lucent leaves a sour aftertaste, made all the more bitter by Alcatel's subsequent profits warning. Neither company should expect its shares to recover in the near future. Lucent, down 21 per cent since the talks became public, is left on the brink of crisis. For Henry Schacht, Lucent chairman, to consider a no- premium deal and then pull out over the distribution of posts is damaging. He needs to raise cash regardless of cost, probably by selling the fibre optics business to Pirelli, and find a chief executive fast. Until there is proof that the business can be stabilised, investors should give Lucent shares a wide berth. Alcatel, down another 5 per cent on Wednesday, and 13 per cent since news of the talks broke, is not in anything like as dire a situation. But the timing of the profits warning looks suspect, and undermines hard- won management credibility. Alcatel's operating performance, strong in the first quarter, has now been deteriorating for two months. Weakness has spread to its US ADSL business, and to Europe; the submarine business is dead in the water. The E3bn "big bath" provisions will muddy comparisons going forward - the best that can be said is that further charges look unlikely. Alcatel's restructuring plan is promising, but does not go far enough. It needs to prune its core telecommunications operations and slash costs. In an era of low growth in telecoms spending, its prospects are not particularly bright. The industrial logic of merging with Lucent, to gain economies of scale and cut costs, still applies. Do not be surprised if it is resurrected one day. Lets wait for the other shoe to drop, ZO.