Lucent Brushes Up on French With Alcatel Merger

A $13B merger comes with nearly 9,000 layoffs and more questions.

News of the proposed $13.4 billion merger with Alcatel sent some at the U.S.-based Lucent Technologies polishing up their French while others updated resumes.

The new joint company worth $25 billion plans a European headquarters and an 8,000-person job cut.

While CEOs of the two companies focused on the synergistic benefits of a "merger of equals" between wire-line Alcatel and wireless Lucent, analysts and others point out this new marriage could have a rocky start.

Although the agreement could spur competitors Nortel or Ericsson to merge or force networking giant Cisco to seek out smaller vendors to plug any gaps, challenges remain, according to Brian Partridge, a Yankee Group senior analyst.

Whereas Jeff Heynen, an analyst with Infonetics said this is a match made in heaven due to Alcatel's market-leading wireline broadband access deployment and Lucent's CDMA strength.

However, "if Alcatel thinks they will change the leadership of the next-gen voice landscape by merging with Lucent, they are misguided," said Stéphane Téral, another Infonetics analyst. The combined Alcatel-Lucent company will be in sixth place behind market leader Nortel and Siemens.

Partridge sees Nortel as likely the next merger. Nortel faces the same challenges as Lucent.

"As observers, it would be foolish not to see challenges," Partridge told Among the potential stumbling blocks: the Franco-American culture shock, job cuts and a climate against foreign investment in the U.S.

Partridge said Lucent enhanced its attractiveness as a merger candidate by bringing in new management and investing in VoIP, 3G and broadband. "They got their business in order and made some good bets in technologies," said Partridge.

The merger would make the new company the "dominant wireline equipment supplier in both North America and Europe," according to Partridge. Still, the union would produce only a medium-sized telecom player above Ericsson but below Cisco.

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