Comments on: Lucent and Alcatel http://www.rawgreed.com/lucent-and-alcatel Online Investing | Investing in gold Thu, 08 Jan 2009 17:06:05 +0000 http://wordpress.org/?v=2.5 By: Andy http://www.rawgreed.com/lucent-and-alcatel#comment-116 Andy Sun, 26 Mar 2006 16:42:16 +0000 http://www.rawgreed.com/?p=262#comment-116 Thanks for the informative comment. I'm eagerly waiting the details of the merger. I agree that Alcatel has the upper hand in the merger discussions and that it benefits Lucent more than Alcatel. I do hope some sort of premium is attached to LU or that the price of LU is based on a later closing date than the March 23rd date you guessed. I believe that the entire telecom and wireless industry will see strong growth in 2006-2007, lead by increased spending in emerging markets. I believe many LU investors are long on the company betting that the telecom industry is only at the beginning of an eventual rebound. Thanks for the informative comment. I’m eagerly waiting the details of the merger. I agree that Alcatel has the upper hand in the merger discussions and that it benefits Lucent more than Alcatel. I do hope some sort of premium is attached to LU or that the price of LU is based on a later closing date than the March 23rd date you guessed. I believe that the entire telecom and wireless industry will see strong growth in 2006-2007, lead by increased spending in emerging markets. I believe many LU investors are long on the company betting that the telecom industry is only at the beginning of an eventual rebound.

]]> By: Alexander Peterc http://www.rawgreed.com/lucent-and-alcatel#comment-115 Alexander Peterc Sun, 26 Mar 2006 16:17:04 +0000 http://www.rawgreed.com/?p=262#comment-115 Mate, you can't honestly expect any company to offer a 52-week high in a bid just because a given share reached that price in the past year, especially when inaccurate, over-optimistic forecasts were given. Such is the case of Lucent remember the warning a couple of months ago? That, market conditions, and poor FY05 results are all reasons why the stock is not at its 52-week high, and they are all objective reasons determining LU's price (and what ALA will pay) today. The merger details are not announced yet at this stage but in all likelihood you'll be getting the equivalent of Alcatel shares for your Lucent shares, and it seems that the value equivalent will be based on Thursday closing prices of both companies. Prices thereafter are affected by speculation and arbitrage and therefore cannot be a base for a deal, otherwise Alcatel and/or Lucent shareholders expose themselves to theoretically unlimited dilution risk. Also take notice of the following: - This is a good deal for both parties; synergies & savings as well as very significant cross-selling opportunities will be reflected in a higher valuation of the combined entity. If the deal is good, all shareholders will benefit, at constant market conditions. - The market is in my opinion currently speculating on a counter-bid on Lucent which is why the stock is up more than Alcatel's (otherwise they would both react identically). That's far-fetched, again in my opinion, because any potential suitor would do better to go for Nortel instead of engaging in a costly bidding war and end up over-paying for the asset. - Lucent needs this merger more than Alcatel. Lucent lost out on the current round of gigantic network overhauls involving deep-fibre, next-gen broadband and IPTV at ATT (Lightspeed) soon enlarged to BellSouth, and at VZ (FiOS...). There will not be another chance for LU. This way, they get to work together on Lightspeed with Alcatel, and add to Alcatel's current near-monopoly in AT&T's access gear the huge LU installed base in optical transport, as well as a very good IMS solution which will ultimately link with Cingular (soon to become integral part of AT&T) which LU is supplying with WCDMA (3G) gear (alongside Ericsson). THIS is where the real game is, and LU can be IN the game by merging, or out and going nowhere by not merging. See, the forces in play are irresistible, and LU doesn't have the upper hand - they have market positions that are extremely attractive for Alcatel but their bargaining power is declining by the minute. It's a good deal, don't fuss about and get it done asap in my opinion, before the rest of the industry gets the consolidation act together. One that should really watch its back is Cisco. Alreadly not going anywhere really with carriers (optics down the drain; weak in IPTV; SFA buyout will not really help because what do you do with routers and set-tops but nothing in between, no DSL, no proper multiservice edge, no FTTx and no integration skills), Cisco will now be really threatened in the most promising market currently, while their core router sales stagnate. Either ALA+LU acquire Juniper in a little while and sign the terminal demise of CSCO, or CSCO acquires ALA+LU... and that's where you'll get your REAL premium for this transaction (because they will have to pay a very significant premium to get ALA+LU in an unfriendly approach - and I can't imagine how it could be friendly). Cheers from the other side of the Atlantic! Mate, you can’t honestly expect any company to offer a 52-week high in a bid just because a given share reached that price in the past year, especially when inaccurate, over-optimistic forecasts were given. Such is the case of Lucent remember the warning a couple of months ago? That, market conditions, and poor FY05 results are all reasons why the stock is not at its 52-week high, and they are all objective reasons determining LU’s price (and what ALA will pay) today.

The merger details are not announced yet at this stage but in all likelihood you’ll be getting the equivalent of Alcatel shares for your Lucent shares, and it seems that the value equivalent will be based on Thursday closing prices of both companies. Prices thereafter are affected by speculation and arbitrage and therefore cannot be a base for a deal, otherwise Alcatel and/or Lucent shareholders expose themselves to theoretically unlimited dilution risk.

Also take notice of the following:

- This is a good deal for both parties; synergies & savings as well as very significant cross-selling opportunities will be reflected in a higher valuation of the combined entity. If the deal is good, all shareholders will benefit, at constant market conditions.

- The market is in my opinion currently speculating on a counter-bid on Lucent which is why the stock is up more than Alcatel’s (otherwise they would both react identically). That’s far-fetched, again in my opinion, because any potential suitor would do better to go for Nortel instead of engaging in a costly bidding war and end up over-paying for the asset.

- Lucent needs this merger more than Alcatel. Lucent lost out on the current round of gigantic network overhauls involving deep-fibre, next-gen broadband and IPTV at ATT (Lightspeed) soon enlarged to BellSouth, and at VZ (FiOS…). There will not be another chance for LU. This way, they get to work together on Lightspeed with Alcatel, and add to Alcatel’s current near-monopoly in AT&T’s access gear the huge LU installed base in optical transport, as well as a very good IMS solution which will ultimately link with Cingular (soon to become integral part of AT&T) which LU is supplying with WCDMA (3G) gear (alongside Ericsson). THIS is where the real game is, and LU can be IN the game by merging, or out and going nowhere by not merging.

See, the forces in play are irresistible, and LU doesn’t have the upper hand - they have market positions that are extremely attractive for Alcatel but their bargaining power is declining by the minute. It’s a good deal, don’t fuss about and get it done asap in my opinion, before the rest of the industry gets the consolidation act together.

One that should really watch its back is Cisco. Alreadly not going anywhere really with carriers (optics down the drain; weak in IPTV; SFA buyout will not really help because what do you do with routers and set-tops but nothing in between, no DSL, no proper multiservice edge, no FTTx and no integration skills), Cisco will now be really threatened in the most promising market currently, while their core router sales stagnate. Either ALA+LU acquire Juniper in a little while and sign the terminal demise of CSCO, or CSCO acquires ALA+LU… and that’s where you’ll get your REAL premium for this transaction (because they will have to pay a very significant premium to get ALA+LU in an unfriendly approach - and I can’t imagine how it could be friendly).
Cheers from the other side of the Atlantic!

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