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Alcatel-Lucent merger could boost enterprise profile, say analysts

Alcatel's line of IP PBXs isn't yet on the radar screens of North American firms

By Nancy Gohring
March 24, 2006 12:00 PM ET

IDG News Service - A merger between Lucent Technologies Inc. and Alcatel SA could boost the profile of products Alcatel sells in the U.S. corporate market, analysts said today.

"Alcatel has a strong line of IP PBXs out there, but they're not really on the radar screen in North America," said Camille Mendler, an analyst at Yankee Group Research Inc. "A merger would help propel the Alcatel brand into the North American enterprise market."

Lucent and Alcatel issued a statement yesterday saying that they are discussing a merger of equals (see "Lucent and Alcatel in merger talks"). The companies went through a similar round of talks in 2001 that ultimately fell through.

Both companies have been anxious to expand their enterprise businesses, said Steve Blood, an analyst at Gartner Inc. Lucent spun off its enterprise products into Avaya Inc. and would have liked to buy that business back but couldn't afford to, he said. Alcatel has been eager to grow its enterprise business, specifically in North America, but has really struggled against its main competitors in that market, Cisco Systems Inc., Nortel Networks Ltd. and Avaya, he said.

A merger could offer Alcatel the benefit of Lucent's strong sales force, which has an understanding of the U.S. market, said Tom Nolle, CEO of Cimi Corp., a consulting and analyst firm in Voorhees, N.J.

The question of how to brand a combined Lucent and Alcatel would be a particularly difficult for the enterprise business, many analysts said. "I'm not of the view that among the enterprise buyer the Lucent brand at this point is significantly stronger than the Alcatel brand," said Nolle. Lucent invested a lot to create the Avaya brand and that process may have undermined the Lucent brand in the corporate market, he said.

However, as far as their operator businesses are concerned, Lucent's brand is strongest in North America and Alcatel's is stronger in Europe.

Despite signs that both companies are interested in strengthening their corporate businesses, there's a danger that the units focused on that segment could struggle in such a large merger, Blood said. Alcatel's enterprise operation currently accounts for just 10% of its business. "I could see how it could add value, but I could also see how it might just get lost," he said.

Vendors that have made a name selling to the operator community may be growing increasingly interested in branching out into enterprise products. LM Ericsson Telephone Co. recently completed its purchase of Marconi Corp., helping to broaden its portfolio of products to sell to businesses. Blood expects to see other vendors such as Nokia Corp. consider acquisitions that might propel them further into the corporate market.

Reprinted with permission from Story copyright 2014 International Data Group. All rights reserved.
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