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Published October 3, 2007 at 7:00 AM
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 Nearly a year after their ill-fated merger, the world's No. 2 networking equipment maker Alcatel-Lucent needs a plan. The company announced Sept. 21 it had acquired IPTV startup Tamblin Ltd., days after unveiling plans to acquire telecom consultancy Thompson Advisory Group. The deals follow the company's purchase of Tropic Networks Inc., whose products help speed information flow over cable lines, announced in April. Terms were not disclosed on any of the deals suggesting, as The Deal's Andrea Orr points out, "that while they may enhance Alcatel-Lucent's product offerings in some key business segments, none of them is likely to be the source of a sorely needed turnaround."
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Earlier in September, the company's shares fell by as much as 14% on lowered sales and profit targets for 2007 stemming from lower sales in the U.S, price declines and costs from merger-related job cuts. One analyst, The Deal's Paul Whitfield, raised the possibility of a demerger for the company by selling off assets. The company's value has shrunk about 40% in 2007, Whitfield noted, as uneasiness about the merger led to a steep decline in sales, while competition held strong from China's Huawei Technologies Co. and Sweden's LM Ericsson AB.
BEAST OF A TASK
Alcatel SA and Lucent Technologies Inc. came together in an $11.6 billion merger in November 2006 and faced many a tall task. Shareholders gave the deal the nod, despite cries of Alcatel overpaying and myriad troubles for Lucent since the spring of 2006. Months in the making, the Alcatel-Lucent team-up created the world's No. 2 networking equipment maker, second only to Cisco Systems Inc., and marked one of the largest deals in the industry's history.
Days after the newly merged Alcatel-Lucent had a less-than-steller debut on the Paris stock exchange, the company plowed ahead with dealmaking, eager to prove itself to investors.
Alcatel-Lucent said Dec. 3, 2006, it would acquire Nortel Networks Corp.'s radio unit for $320 million, just two days after the joined company floated amid analysts' warnings the new entity had a tall order ahead -- to deliver.
AIN'T NO SUNSHINE
The merger plan drew criticism from a host of onlookers, including France's largest investment advisory firm, Proxinvest, wary of the possibility of Alcatel overpaying.
- The French buyer initially agreed to swap 0.1952 of an Alcatel share for every Lucent share, which valued the deal at $13.4 billion in April, but after both companies' shares suffered, the deal value took a dip as well.
- Weeks later, Lucent posted disappointing quarterly results. Several months down the road, Lucent's tremendous pension obligations and hefty costs also threatened to derail the deal.
- And even as recently as Sept. 5, the likely outcome was unclear, with new Alcatel stock owners, namely hedge funds, expected to vote against the deal.
- One long-time critic of the merger, Dresdner Kleinwort's Per Lindberg, suggested Motorola Inc. could make a better partner for Alcatel and Cisco could make a better one for Lucent.
- In July, dealwatchers pondered the fate of the pair whose union prevote was off to a less-than-breezy start as both companies faced harsh critics and falling stock prices.
- The merger then needed to sustain the scrutiny of CFIUS, the U.S. review committee that vets cross-border deals with American companies. Sources told The Deal at the time that it would likely go through.
NO REST FOR THE WEARY
Meanwhile, the dealmaking went on.
- In April 2006, Alcatel unloaded its satellite businesses for nearly $2 billion to Thales SA in an attempt to remove a potential hurdle to the merger.
- In June 2006, Nokia Oyj and Siemens AG unveiled $31.5 billion merger plans for their mobile and fixed-line networking equipment units, another megaunion in the industry. See another Dealwatch for more.
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On Sept. 1, 2006, Alcatel announced an agreement to acquire Nortel's third-generation mobile phone unit for $320 million.
- After the Alcatel-Lucent deal was announced, rival Nortel looked like prime takeover prey.
--Carolyn Murphy
| Dealwatch executive summary |
The Date |
The Action |
| 9.21.07 |
Alcatel-Lucent's dealmaking lacks luster. |
| 9.13.07 |
Alcatel-Lucent shares fall on revised guidance. |
| 5.10.07 |
Alcatel-Lucent must integrate two massive IP portfolios. |
| 4.2007 |
Alcatel-Lucent grabs Tropic, sets sights on cable. |
| 1.23.07 |
Alcatel-Lucent lowers first-quarter forecast. |
| 12.03.06 |
Alcatel-Lucent grabs Nortel unit. |
| 12.01.06 |
Alcatel-Lucent debuts on the Paris exchange. |
| 9.07.06 |
The votes are in; it's a done deal. |
| 9.05.06 |
It looks like the vote could go either way. |
| 8.16.06 |
Lucent's pension obligations raise analyst eyebrows. |
| 7.20.06 |
Prevote, the proposed merger is off to a rocky start. |
| 6.19.06 |
Nokia and Siemens agree to a $31.5 billion deal. |
| 4.25.06 |
Lucent posts weak quarterly results. |
| 4.05.06 |
Alcatel sells satellite biz. |
| 4.05.06 |
After Alcatel-Lucent, Nortel could become takeover prey, fast. |
| 4.03.06 |
Early buzz sends Alcatel and Lucent shares up, but questions abound. |
| 3.27.06 |
CFIUS will review Alcatel-Lucent. |
| 3.24.06 |
Alcatel-Lucent plan their merger. |
Source: The Deal |
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