Kevin Tolly: The techno-jumble that would have been Lucatel

As I write this, the marriage between Lucent Technologies Inc. and Alcatel SA has just been called off. Let’s consider, though, the piecemeal parts that would have combined to make this new company and what impact it would have had on network users.

With only the benefit of my ever-less-reliable memory, I count nine companies, the people, product or technologies that would have been included in the combined company. These are in addition to the non-trivial assets that the companies have developed on their own over the years.

In the LAN switching space, the product mix would include technology from LANNET, Prominet, Packet Engines and Xylan. (Lucent spun off the LANNET and Prominet product lines as part of Avaya Inc. last year but some remnants remain.)

For the WAN, Newbridge Networks Inc. and Ascend Communications Inc. would contribute to the core, while Xedia and Assured Access dealt with the edge. And let’s not forget that before Lucent bought it, Ascend gobbled up top-tier frame relay vendor Cascade Corp.

At the physical layer, I’d add cabling vendor Berk-Tek but I can’t figure out whether it is still part of Alcatel. Some months back, it started showing up as Nexan Ltd. That’s when I gave up.

This new Lucent/Alcatel would have been more like a cartel than a company.

Imagine reconciling all those architectures into “a cohesive solutions strategy” (as the new entity’s market literature would no doubt say). In your dreams!

The thought of such a company should reveal how patently ridiculous it is to think that “seamless” integration is a realistic goal.

Furthermore, Lucent’s pursuit of Alcatel makes no sense from a “strategy” point of view. Think about it. Last year, Lucent boldly announced it was going to spin off “low-growth” units – specifically PBXs, campus switches and cabling.

Now, less than a year later, it aggressively pursues becoming one with a company primarily recognized for PBXs, campus switches and cabling. Brilliant!

While such mergers are always ostensibly done to improve customer value, one as ludicrous as this shows as clear as day the real reason: to boost the stock price.

And what about the price? Just before the talks were called off, the deal was valued just north of US$22 billion. A lot of money, right?

Not if you consider that, just a few years ago, Lucent acquired Ascend for about US$11 billion. Around this time last year, Cisco Systems Inc. handed over some US$4 billion in stock for puny load-balancer ArrowPoint Communications Inc. – a company that had 1999 revenue of about US$20 million. More recently, Nortel Networks Corp. paid US$7 billion in stock for Alteon WebSystems Inc. – a start-up that had, in essence, one product – a multifunction switch.

Granted, those deals would have dramatically different prices today, but to think that such a prominent part of the old AT&T Corp. empire could cease to exist for a number that was anywhere near what a single-product, three-year-old start-up went for is mind-numbing.

For now, at least, Lucatel executives won’t come into being, and the tough questions will remain unasked, but according to some sources, the talks might be revived.

For network managers, though, there is one clear lesson – the myth of “buying from the big guy” to get that guarantee of stability is exposed. Everything is relative, and no company is immune to the vagaries of the market.

Would you recommend this article?


Thanks for taking the time to let us know what you think of this article!
We'd love to hear your opinion about this or any other story you read in our publication.

Jim Love, Chief Content Officer, IT World Canada

Featured Download

Previous article
Next article

Featured Articles

Cybersecurity in 2024: Priorities and challenges for Canadian organizations 

By Derek Manky As predictions for 2024 point to the continued expansion...

Survey shows generative AI is a top priority for Canadian corporate leaders.

Leaders are devoting significant budget to generative AI for 2024 Canadian corporate...

Related Tech News

Tech Jobs

Our experienced team of journalists and bloggers bring you engaging in-depth interviews, videos and content targeted to IT professionals and line-of-business executives.

Tech Companies Hiring Right Now