Vendor consolidation in sight: Alcatel- Lucent
Vendor consolidation in sight: Alcatel- Lucent
It is the big announcement of the week. Alcatel and Lucent are used to talk merger (at least from 2001), but this time it seems serious. First, both companies confirmed talks, and both companies are in better shape than five years ago. Lucent, however, has shrunk dramatically, has pension concerns, and recently cut its 2006 outlook. Alcatel, meanwhile, looks healthy in comparison. Can the deal a “merger of equals”. I do not think so with Alcatel weighting some $20bn capitalization vs $12bn for Lucent. The Alcatel share is up, while the Lucent share is down. The combined company could have $25bn in turnover, one of the largest, if not the largest, in the telecom world. Who will lead the combined company? Two names are circulating: Mike Quigley (Alcatel) and Patt Russo (Lucent).
The deal makes sense in any way. First, and in spite of portfolio overlap, both companies have specific strengths: geographic complementarity (US vs Europe and ROW), strength in IMS, optics, CDMA, professional services and the Bell Labs for Lucent; DSL, carrier router, broadband access/triple-play and IPTV, optics (1st worldwide), GSM, space, submarine systems, for Alcatel, strong main lines installed base for both.
What are the rationales behind the potential deal? Mainly rationalization and increased competition, uncertain capex outlook Europe and North America, streamlining product portfolio, reduce costs and particularly R&D expenses.
If the deal is made, other vendors will be under increasing pressure, and it could trigger a new wave of consolidation among vendors. At the first row, Siemens and Nortel. Siemens Comm is known to seek partners and Nortel is just recovering. With fixed-mobile convergence in sight, Motorola and Nokia could also be interested to deal with strong fixed expertise. Continued.....