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Wednesday, 30 May, 2001, 21:01 GMT 22:01 UK
What now for Lucent
Lucent webgrab

By BBC News Online's North America Business Reporter, David Schepp

For those with an eye to history, the dissolution of a merger deal between telecommunications giants Lucent Technologies and Alcatel of France is a good thing.

The defunct deal spared an ignominious ending to Lucent, a company that traces its roots back to Alexander Graham Bell and the invention of the telephone - not to mention technological achievements that have resulted in six Nobel prizes.

With the deal off, what does the future hold for Lucent now that the New Jersey-based company will not be calling Paris home?

In the wake of the failed deal, Lucent's stock, the widest held in the US, gained slightly in early trading on Wednesday, before falling back to close down 1 cent at $8.31.

Turning the debt-laden communications behemoth into a moneymaking machine would take leadership the company does not have despite having roots in the largest telecom market in the world.

Bright beginnings

When it was spun off from parent AT&T in 1996, shareholders snapped up shares of Lucent and sent its share price climbing steadily in the face of a bright future.

At the time, investors felt Lucent's trump card was the esteemed Bell Laboratories, the research arm of AT&T credited with investing the transistor in 1947, among other things.

In recent years telecommunications stocks have come under great pressure to perform in a mature US market, as profit margins have eroded within the sector.

Within the last year, however, shares of the communications-equipment maker have tumbled over 87%, after reaching a high of $64 a share last summer.

At the time, the company endured a tech-stock tumble and struggled to define its businesses.

In January, the company said it was laying off 10,000 employees and would take a charge of as much as $1.6bn to cover the layoffs.

Lucent continues to face myriad woes, including rumours about a possible bankruptcy and a botched stock float for its optical-networks business, Agere Systems.

The company is also saddled with debt and lacks the management leadership its needs to guide it back to guide it through troubled times.

Failed deal

The merger deal with Alcatel fell apart after disagreements over the structure of the combined company's board and management control, sources familiar with the situation said.

But neither is the company likely to find a company, such as Alcatel, which is willing to take the company lock, stock and barrel. If Lucent gets sold, it will be in piecemeal - not one fell swoop.

All of this may leave Lucent chief executive Henry Schacht scratching his head, seemingly having tried everything to right the ailing company under his command.

For now, Lucent must continue to focus on its restructuring plan to reduce expenses as well as to sell-off its non-core businesses, analysts say.

Analysts agree that there are few other suitors willing to take the company as-is.

"Who else is out there who would take on a nightmare like that?" said one trader, who specialises in trading takeover stocks.

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See also:

30 May 01 | Business
Alcatel share bounce fades
30 May 01 | Business
Alcatel-Lucent merger is off
30 May 01 | Business
Alcatel share bounce fades
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Alcatel-Lucent deal faces obstacles
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Lucent sold on rumour
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Lucent posts $1bn first-quarter loss
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