Alcatel-Lucent

Almost three years since the troubled merger that created Alcatel-Lucent SA, the Franco-American company appears to have turned a corner and is now being touted as both hunter and hunted.

2009

Sept. 2: New dawn breaks for Alcatel-Lucent: Almost three years since the troubled merger that created Alcatel-Lucent SA, the Franco-American company appears to have turned a corner and is now being touted as both hunter and hunted. True, the Paris-based group hasn't turned a profit since its creation in December 2006, but its shares have risen more than 80% this year, buoyed by its own forecasts of profit in the second half of next year, analyst upgrades and rumors of a potential Chinese takeover.

Alcatel-Lucent shares climbed as much as 21% on Aug. 26 on rumors of an unnamed Chinese bidder, with suggestions that either Huawei Technologies Co. Ltd. or ZTE Corp.A Chinese bid for the company would face significant hurdles, not least because of fears of job losses and likely reluctance from both the French and U.S. governments to see technology fall into foreign hands. was the possible predator. - Paul Whitfield

June 24: Alcatel-Lucent names HP alliance leader: Alcatel-Lucent SA (NYSE:ALU) has promoted an internal executive to lead its recently announced alliance with Hewlett-Packard Co. (NYSE:HPQ). Christel Heydemann, who most recently led sales account management for Alcatel-Lucent France, has been appointed strategic alliance vice president for HP. Heydemann, a longtime Alcatel employee, will oversee go-to-market activities, co-development and alignment of products, and governance. No word on who her HP counterpart will be. - Suzanne Stevens 

June 18: HP, Alcatel to form multibillion-dollar alliance: Hewlett-Packard Co. (NYSE:HPQ) and Alcatel-Lucent (NYSE:ALU) signed an agreement stating an intent to form a 10-year global alliance that "could generate billions" in net revenues for the companies. The plan is basically to jointly market their products to businesses. In other news, Alcatel may acquire three manufacturing plants from India telecom equipment maker ITI Ltd. - Baz Hiralal

2008

Dec. 18: Alcatel sells Thales stake: Alcatel-Lucent, the world's largest fixed-line telecommunications equipment maker, began an expected overhaul of its operations Friday, when it agreed to sell a 20.8% stake in French engineering group Thales SA to Dassault Aviation SA for €1.57 billion ($2.27 billion).

Dec. 12: Ben Versaayen's moves at Alcatel-Lucent 'not drastic enough': Everyone was waiting for some hard news on asset sales from Alcatel-Lucent [ALU] on Friday, in the first restructuring announcement since CEO Ben Versaayen took over from the ousted Patricia Russo, but instead the company disappointed when it announced more job cuts and a whole lot of jargon that seems ill-suited to the current economy. - Andrea Orr

Sept. 2: Verwaayen's to-do list at Alcatel-Lucent: Alcatel-Lucent [ALU] has found its new leaders: Philippe Camus of Lagardere SCA (and Evercore Partners) will be nonexecutive chairman, and former BT plc [BT] CEO Ben Verwaayen (pictured) will be CEO. His challenges at telecom equipment vendor Alcatel-Lucent look to be even greater, though. Besides dealing with ferocious competition from the likes of China's Huawei, Verwaayen has to forge a unified culture at the U.S.-French company, formed when Alcatel bought Lucent in 2006 but still not successfully integrated either in terms of products or decision-making. - Kenneth Klee

Aug. 28: Alcatel-Lucent may tap former manager for toughest job in telecom: When Alcatel-Lucent SA [ALU] dismissed CEO Patricia Russo last month, speculation immediately turned to who might want to to succeed her in what is probably the toughest job in telecom: reversing the course of a company that has suffered six straight quarters of losses and had never really recovered from the ill-advised 2006 merger that formed the company.

The Wall Street Journal reported that a decision is near and Mike Quigley, a longtime Alcatel manager who left the company last year, is the front runner. According to the report, the final decision is still weeks away. But just a sign of progress has given a badly needed lift to the company's shares. -Andrea Orr
 

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2007: BEAST OF A TASK

Earlier in September, 2007, 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 noted, 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.

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.
• 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.

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