Merger of Lucent, Alcatel called off |

Merger of Lucent, Alcatel called off

NEW YORK (AP) – Merger talks between French telecommunications giant Alcatel SA and Lucent Technologies Inc. were called off Tuesday after intense negotiations over the long holiday weekend failed to produce an agreement.

In a statement, both companies announced that the negotiations in Paris had failed, but did not explain why talks were ended.

A source close to the negotiations said issues over corporate governance and management of the combined company were the main roadblocks preventing a deal.

A merger, with an estimated value of as much as $32 billion, would have marked one of the largest combinations of a U.S. technology group with a European company.

But Lucent officials balked because they did not believe that Alcatel was treating the deal as a merger of equals and acted as though the French firm were buying Lucent.

Analysts had said the new company would have a work force of more than 200,000 but would probably have had to cut 20,000 to 30,000 jobs to reduce costs.

Most job cuts resulting from the merger would probably have occured in the United States, where the companies have the most overlapping operations, analyst Sean Faughnan of Goldman, Sachs & Co. wrote in a research note to clients.

Since January, financially plagued Lucent has announced plans to reduce its work force by up to 16,000 jobs as it streamlines operations and sells off some of its factories.

Lucent, which was spun off from AT&T Corp. in 1996, is among the most widely held stocks in America. Lucent predecessor Bell Labs has been a wellspring of innovation over the years, with a role in developing the transistor, the laser and superconductors.

But Lucent has fallen on hard times amid a string of strategic missteps and profit disappointments that led to the ouster of chief executive Richard McGinn and a major restructuring. The company’s shares are hovering at about one-tenth of their all-time high, hit in late 1999.

Analysts said that a deal by Alcatel, which chief executive Serge Tchuruk has built into a diversified maker of cell phones, high-speed telecommunications equipment and Internet switches, would have made it a major player in the U.S. market.

More than half of Alcatel’s sales are in Europe, while 23 percent of its revenue comes from the United States.

In trading Tuesday on the New York Stock Exchange, Lucent shares were down 11.5 percent, or $1.08, to close at $8.32 a share, while Alcatel’s U.S. shares were down 70 cents, or 2.5 percent, at $27.41.

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