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Author: Jean-Charles Doineau
Alcatel and Lucent Technologies announced on 2 April 2006 that they have entered into a definitive merger agreement. The transaction is to close in the next six months and will create a $25 billion giant.
We have already discussed the strategic rationales of the merger in a previous comment. The deal will create a single entity that will be better equipped to serve the needs - both at product and service level - of the US service provider community. This combined company will also benefit from having more financial capabilities to support the important long-term R&D gambles that a network equipment provider has to undertake.
At a more specific level, most of the issues that raised difficulties in 2001 have been cleared as planned. Bell Labs will be put in a subsidiary, with an autonomous company board made up of US citizens, who will be nominated by the US authorities. Management of the company will be handed by Pat Russo, former Lucent Technologies CEO. The new combined company will be headquartered and based in Paris. This new company - let's call it 'Lucatel' - owns an impressive number of seats in the top two steps of the network equipment market podium: number one in DSL, number two in mobility solutions and number two in professional services.
The agenda of the new company is pretty clear, and it will certainly be focused on delivering operational efficiency gains at the very beginning. Lucatel plans to achieve $1.7 billion of operational synergies after three years, 30% of this being achieved in year one. One component of this programme will come from layoffs, which will affect approximately 10% of the company workforce. At a company level, talks with French company Thales are still on the agenda, which could ultimately lead to Lucatel being protected from any external financial buyout. By transferring its French defence and satellite business to Thales and gaining a controlling minority stake in exchange, Lucatel could finally become, after 15 years of management, what Alcatel's current CEO Serge Tchuruk wanted Alcatel to be - 'a world leader in telecommunications equipment, protected from external acquisition threats'.
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