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Lucent, Alcatel Re-Enter Merger Talks

3/24/2006 3:18 AM Eastern

It appears that technology gear giants Lucent Technologies Inc. and Alcatel SA are in talks to merge their companies in a deal that could be worth upward of $33 billion.

Murray Hills, N.J.-based Lucent and Paris-based Alcatel have confirmed in statements released last week that they are in talks about a merger “that is intended to be priced at market.”

“There can be no assurances that any agreement will be reached or that a transaction will be consummated. We will have no further comment until an agreement is reached or the discussions are terminated,” according to the joint statement.

Both companies are major suppliers of telecommunications equipment and software systems, ranging from soft switches to optical-networking gear. Lucent is also home to Bell Labs, a mainstay in telecom research and development.

This is not the first attempt at a corporate wedding between Lucent and Alcatel. The two companies had made a previous attempt at a merger in 2001, but that negotiation hit a deadlock over which company would assume the controlling position.

In contrast, the two companies are now negotiating a merger of equals, despite the fact that with a market value of about $22 billion, Alcatel is the bigger fish compared with Lucent’s $12.6 billion value.

If the merger does move forward, it could give Alcatel an entry into the U.S. equipment market and conversely give Lucent a stronger play in overseas markets.

In separate news, Lucent last week gained approval from the U.S. Bankruptcy Court in Delaware to acquire the assets of Riverstone Networks, a supplier of Ethernet routers. Lucent will pay $207 million for the assets following a bankruptcy auction in February.

Adding Santa Clara, Calif.-based Riverstone’s products to Lucent’s portfolio will strengthen its play in the Ethernet and optical-Ethernet market. Analysts have estimated that the carrier-grade Ethernet market will grow from $4 billion in 2005 to $7 billion by 2008.