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Caveat Emptor: The Alcatel and Lucent Technologies Deal

From Bloomberg this morning:

Shares of Alcatel SA, the world’s biggest maker of broadband Internet equipment, rose as much as 8.2 percent after the company agreed to buy Lucent Technologies Inc. in a $13.4 billion share swap.

There’s a phrase in the City (London): a deal is never done until the money has changed hands. Nowhere might that phrase be possibly more relevant than in telecoms right now. I’m not a cynic, but something tells me this announcement over the Lucent-Alcatel merger is a little premature. I can just see something going wrong and stalling up this merger at the 11th hour, most likely from Alcatel’s camp.

Take a look at the timeline of the deal, and it starts to look suspiciously quick and Lucent-driven: first of all, Lucent was supposed to be clearing problems over potential security leaks from its Bell Labs division with the U.S. government only last week. This is usually a bureaucratic process that takes weeks, not 48 hours. Initially this was supposed to be a buyout, too, but by Thursday — again last week — this was now apparenty a merger. And now, as if all that wasn’t enough, the proposed CEO of the combined telecoms giant is not anyone from Alcatel, but Lucent’s own Patricia Russo. Alcatel is 40% larger than NASDAQ-listed Lucent Technology. Strangely, it hasn’t been Alcatel making announcements of the buy-out (until today’s Bloomberg report) but again, Lucent. I’m not surprised either: the company is coming out of this with the sweetest deal it could hope for.

Something tells me Lucent — the company getting bought out — has been pushing this a little too hard, and classicly in such cases, the purchasing company is going to get buyer’s nerves right before the hand-over of real currency, and if it’s not Alcatel itself, I can see French government bureaucrats getting on board.

If not, Alcatel should heed the warning in the title of this piece, or they may find they don’t have much of a company left after their acquisition.

About Daniel M. Harrison

  • Pirano

    I can’t believe Alcatel would allow the CEO to come from the Lucent camp. It seems out of character. I could see her running the Americas at an EVP level, but even that seems like a step out of the box.

  • technic

    I think Russo should be let go. She has been nothing but bad for the company since she took over. She seems shady and unreliable when it comes to the companies true stance. She is a liar and incompetent when it comes to securing the companies future.