With the presses barely dry on the idea that Alcatel-Lucent and NSN should consider merging, another rumor emerged in a Reuters report yesterday that Alcatel-Lucent is seeing acquisition interest from an unnamed Chinese vendor. That news boosted the Franco-American vendor's stock 13 percent yesterday. Natixis raised its rating on Alcatel-Lucent to "buy" from "reduce" and increased its price target to €2.78 (US$3.95) on the Paris bourse. However, no other details about the rumor or the share price increase were made available.
Despite a revamped management team, Alcatel-Lucent still has yet to see any profitability since the two vendors announced their marriage in 2006. Back then, the idea on paper was that the combined company could not only cut costs, but be in a better position to fend off Chinese telecom vendor rivals such as Huawei and ZTE. But even if Alca-Lu were to accept the hand of either Chinese vendor, the deal likely would be blocked by the federal government due to its involvement in government communications projects via its LGS division.
Another option, which surfaced in another Reuters report, would be for Alcatel-Lucent to merge with fellow European telco vendor NGN to fend off Huawei and ZTE's ascent in the Western market. But given the less than stellar performance both companies had with their previous mergers, many feel such a union will never happen.
"Both companies are coming from recent painful mergers, and this one would probably be even more complicated and painful," said Bengt Nordstrom, the CEO of Northstream, a Swedish telecoms consultancy in a Reuters article.
Should Alca-Lu and NSN merge?