Daily Spin: Evaluating Alcatel, Lucent Hookup

The Big Picture

Evaluating Alcatel, Lucent Hookup

In the networking market these days -- especially at the high end -- it's all about size and scale. So while Alcatel and Lucent spent almost five years contemplating a deal -- in the process quibbling mainly about who would be in control of the combined company -- in the end the combination of these two giants was inevitable. Carriers are merging at an alarming rate; the vendors that supply them need to combine to keep negotiating pace.

A few interesting sidenotes to this deal:

- Even though considered a "merger of equals", Alcatel shareholders will own about 60 percent of the combined company, Lucent 40 percent

- The combined company has sales of just over $25 billion, just about the equal of Cisco Systems. Vendors are consolidating to pursue the massive opportunity of combining voice, data and video traffic on emerging consolidated network infrastructures.- National security issues complicated the deal on both ends. Alcatel was looking to raise its stake in defense electronics group Thales; that deal may go by the wayside now. Meanwhile, Lucent plans to create an independent U.S.-based subsidiary to handle sensitive security-related research work with the U.S. government.

- At one time, Bell Labs was the preeminent pure research institution in the world, responsible for groundbreaking work in areas ranging from transistors, lasers, optics, wireless technology and the Unix operating system. While the combined Alcatel/Lucent paid lip service to ramping up R&D, the merger represents another step in the marginalization of this once great research facility.

- Speculation immediately moved to which vendors might be the next to merge. Among those under the most pressure: U.S.'s Nortel, Finlad's Nokia and Germany's Siemens. All of those potential deals, as well as the smaller buy-ups that happen at the lower-end of the market, require close watching by enterprise IT managers.

- Vendor consolidation mirrors carrier consolidation. In the past year or so, Cingular and AT&T Wireless and Sprint and Nextel have merged. Verizon acquired MCI. AT&T was bought out by SBC Communications, and those combined companies then agreed to buy BellSouth.

NWC's Take on the News

Here's what we think of today's breaking news. Read the story and leave your own comment. Let's see if we agree ; >

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