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#30623 05/30/01 04:28 PM
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What’s the value of language? Well, in the testosterone-driven heights of major business, it seems the difference in terminology between describing a deal as a merger rather than a takeover can mean the difference of millions of dollars.

http://nytimes.com/2001/05/30/technology/30LUCE

I hope the poor employees of Lucent appreciate the importance of this difference to their chairman as they suffer a slow death over the next year or so.



#30624 05/30/01 11:35 PM
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Heard on news last night on Business News that Lucent has withdrawn and both stocks went down a couple of points.


#30625 05/31/01 11:31 AM
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Yes - here's the latest speculation on motives:
http://www.nytimes.com/2001/05/31/technology/31LUCE

I guess what really interested me was the impression that even when the facts don't change, the specific choice of language to describe the event can change the whole outcome so dramatically.

And just check out the use of optics in the report above!


#30626 05/31/01 12:58 PM
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What makes it even more gross is that the companies do optics-related research, so you think they'd be careful about abusing the word!


#30627 05/31/01 01:02 PM
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Indeed - horrid mis-communication from the company which owns Bell Labs (a proud name), and lack of clarity from a company called Lucent!


#30628 05/31/01 01:21 PM
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It si enough to send you to the nearest pub, and retreat to where you see the whole world through an optic.


#30629 05/31/01 03:09 PM
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Yes - here's the latest speculation on motives:
http://www.nytimes.com/2001/05/31/technology/31LUCE

Tried several times to access this link and the original one cited and keep getting the msg that it "does not exist at this address" and the suggestion that I search for entries over 30 days old???? Anyone else having this problem?


#30630 05/31/01 03:33 PM
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Hmmm. Strange – just tried it again, and I see what you mean – yet I've also just tried the orginal URL I copied and it worked OK. Apologies to all those with no interest, skip the long post: here is the article

May 31, 2001
News Analysis: Pride and Practicalities Behind
Lucent's Failed 'Merger'
By SETH SCHIESEL
News

Analysis

How many billions of dollars is appearance worth to Lucent Technologies?
That is one of the many questions that investors might have asked after Lucent and Alcatel of France, two of the world's biggest makers of communications equipment, called off their merger talks Tuesday.
For the record, the two companies offered no explanation. But executives close to the negotiations, in a wave of anonymity, said Lucent's chairman, Henry B. Schacht, essentially shut down the talks because he worried that Alcatel, holding an extra board seat or two, could control the combined company and make him the man who sold Bell Labs to the French.
But with or without the boardroom issue, the deal was already structured as an acquisition of Lucent by Alcatel. Alcatel's shareholders would have owned 58 percent of the combined company's stock.
If seats on the board were indeed the deal buster, it might appear that Mr. Schacht was holding out for equal board representation because he wanted Lucent- appointed directors to have an equal role in running the company and holding its management accountable.
But, apparently, that was not really the issue. In interviews yesterday with people close to the talks, who insisted on anonymity, it emerged that Mr. Schacht and the Lucent team were mainly concerned about having the deal presented as a "merger of equals" for the purposes of "optics." That is, for the purposes of public packaging.
Mr. Schacht was not made available to comment. But in interviews yesterday, others talked about how packaging the deal as a merger of equals would be fundamentally vital to making the deal happen and to making the combined company work.
"Some of those optics would be important in selling the deal," one person said. "To some extent it's a feel thing; it started to feel more like an acquisition than a merger. But it's also what you can sell in the U.S., beginning with customers who want Lucent in the game and ranging to the U.S. government and the shareholders."
Bell Labs, the vaunted research house that Lucent inherited from AT&T, certainly has an illustrious history, and is a fantastic brand. But for all of the hemming and hawing that would have erupted on Capitol Hill, the government might have been hard put to actually stop an acquisition of Lucent on any national security grounds. As for the shareholders, if it was a good deal to sell the company essentially for no premium — as Mr. Schacht and his bankers had tentatively agreed to do — it is hard to understand why it would suddenly become a bad deal were Alcatel to exercise its 58 percent prerogative by controlling the board.
There was also a thought that painting the deal as a merger of equals would have helped retain Lucent employees. But with Lucent's shares worth only about 10 percent of their record high in late 1999 and big layoffs already under way, it is difficult to imagine how morale at the company could get much worse.
After spinning through such optics, these executives then got to the heart of the matter: Mr. Schacht and the Lucent team just could not get comfortable with the concept that Alcatel would be in charge. Mr. Schacht was reported to have been upset that newspaper accounts were describing the tentative deal as an acquisition, rather than as a merger. Moreover, the Lucent team started to feel that the Alcatel executives were not giving them the respect they deserved.
In the end, of course, Mr. Schacht may have recognized that there really is no such animal as a merger of equals. Unless two companies actually recapitalize themselves with a new stock, there is always an acquirer and an acquiree. Bell Atlantic and GTE, for instance, did their best to portray their get-together last year as a "merger of equals" that created Verizon (a new name, not a new stock). But deep down, no one was fooled, not least GTE's executives; Bell Atlantic is in charge.
So perhaps the concept that Mr. Schacht is allowing optics — style points and respect issues — to determine the future of his company is difficult to accept. Perhaps there was a bit more going on.
Consider an episode a few years ago that is familiar to just about every technology investment banker on Wall Street. On Sept. 8, 1998, Alcatel completed its acquisition of DSC, a communications equipment company based in Plano, Tex. DSC's stockholders had their shares converted into Alcatel shares, which closed that day at $37. A mere nine days later, on Sept. 17, Alcatel surprised analysts by announcing that it would not meet its financial targets. Alcatel's shares plunged, closing that day at $19.25. DSC's shareholders were understandably irate.
Is it possible that Lucent took a look at Alcatel's books and saw storm clouds? Is it possible that Lucent did not want to get DSC'ed? After all, no sooner had the companies announced that their talks had ended Tuesday afternoon than Alcatel announced that it expected to post a loss of about $2.6 billion in the second quarter.
Despite the melodrama of the broken engagement, it is possible that Alcatel and Lucent could try again. Together, the companies expected to save $4 billion in annual costs, about 8 percent of their combined annual sales of roughly $50 billion.
Those prospective savings alone may provide Serge Tchuruk, the chairman of Alcatel, a good reason to revisit the concept, if his company can afford it. Of course, in Round 2, Alcatel would probably have to offer a significant premium to Lucent's shareholders. And in Round 2 there would be no pretense of merger talk. This would be a straight-out acquisition, and the provision of a premium could allow Mr. Schacht to say he got a good deal for his shareholders.
But for now, Lucent faces the prospect of going it alone.
While the entire communications equipment sector is swooning because of slowing sales by communications carriers, Lucent also has many problems of its own making.
In terms of technology, two main issues stand out. First, the company missed big parts of the recent optical network revolution, which involved the deployment of new generations of technology that transmit information using pulses of light. With a series of bad technical bets, Lucent ceded narrow but vital swaths of the optical landscape to its archrival, the Nortel Networks of Canada.
Second, Lucent has never developed a world-class product for routing Internet information, or packets. The market for Internet routers was long dominated by Cisco Systems Inc., but over the last few years Juniper Networks Inc. has demonstrated that it is possible to compete with and even beat Cisco at its own game. Lucent (and Nortel, for that matter) have not made a major dent in that market.
The deeper problem that confronts Mr. Schacht is that many of Lucent's core business practices have become badly distorted. Under the previous chairman, Richard A. McGinn, Lucent set ever more aggressive growth targets. To meet them, the company began inducing customers to accelerate their purchases of Lucent equipment — in some cases by extending high-risk loans that have come back to haunt the company. Some customers sped up their purchases, but only by reducing purchases planned for later. As this process played out, Lucent largely lost the ability to forecast its financial results accurately (and requirements for components from other companies). That threw the company's cost structure out of alignment, making it even more difficult for Lucent to meet its financial goals.
All this may not be Mr. Schacht's problem much longer. Months ago, Lucent hired at least one executive search firm to look for Mr. Schacht's successor. That search clearly took a back seat to the Alcatel discussions, but one executive recruiter said that it was possible that a leading candidate could emerge within a few months. It remains to be seen who might be up to such a job — and who would want it.


© New York Times



#30631 05/31/01 04:03 PM
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Thanks Mav, for posting that .. I'd gotten the "page you've requested does not exist at this address" message, too and was interested in what the article said.
After all I do own two shares! With the dividend drop I'll have to cancel the QE2 vacation plans.



#30632 05/31/01 04:10 PM
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the QE2 vacation plans

Poor wow! But pity those fine upstanding young gentlemen from the Murdoch and Packer families, who suddenly find their shares in One.Tel dropping from last year's $1.25 to Monday's suspension on 8.3 cents.... HAH! I shan't be able to sleep tonight [boo-hoo]

And guess who's standing to lose $520 million for installing One.Tel's fibre-optic network....? Yep, it's Lucent.


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