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Lucent now flies solo
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May 30, 2001: 5:00 p.m. ET
Demise of $23.5B Alcatel merger pushes Lucent to raise cash, sell optics unit
By Staff Writer Luisa Beltran
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NEW YORK (CNNfn) - Lucent Technologies vowed Wednesday to go on by itself now that its $23.5 billion merger with Alcatel SA has broken up.
Lucent, which had $5.4 billion in debt as of March 31, has continued to see progress in its financial revival and is not looking for a partner, a spokesman told CNNfn.com.
"We've always said we were not for sale," said Lucent spokesman Bill Price. "We have the liquidity to achieve a turnaround. Our objective is to continue with [it]."
Lucent Technologies (LU: down $0.26 to $7.88, Research, Estimates) and French networking firm Alcatel SA called off their $23.5 billion merger Tuesday, ending weeks of speculation. Issues of control effectively scuttled the proposed transaction, which would have created a global giant in the telecommunications industry. Alcatel did not want to give Lucent equal weight in the merger and the firms quibbled over the number of board seats each would get.
Shares for Lucent have plummeted nearly 88 percent from its 52-week high of $67.18. The demise of the Alcatel merger caused Lucent stock to drop 2 percent Wednesday while Alcatel (ALA: up $0.28 to $25.27, Research, Estimates) plunged nearly 9 percent.
"Combined they would have been stronger," said analyst Charles Disanza of Gerard Klauer Mattision & Co.
The merger with Alcatel presented the unlikely opportunity of a good fit for both companies and opportunities for synergies, he said. A similar opportunity may be hard to find but speculation has risen that other firms may be interested in the troubled telecom maker.
Potential acquirers may include Cisco Systems since Cisco's (CSCO: up $0.26 to $19.26, Research, Estimates) service provider business is not as strong as it should be. A link up with Siemens AG (SI: down $1.24 to $71.90, Research, Estimates) would also be a good geographic fit, analysts said.
But other analysts point out that the demise of the Alcatel merger does not necessarily make Lucent a likely acquisition target.
"Lucent will now go it alone, cut costs and focus on its products," said analyst Lawrence Harris of Josephthal & Co. Inc.
Raising cash
Lucent until last year was a Wall Street favorite but has since fallen behind rivals in the key optical networking market, struggling with manufacturing constraints and declining demand for its core telephone equipment products.
The biggest priority for Lucent currently is to sell its optical fiber unit. In April, four companies were in the running to buy the business, which could fetch as much as $5 billion, analysts said.
Lucent is pressing ahead with the sale of the business, but Lucent's Price declined to comment on the unit's price tag. "We never slowed down on the sale of the fiber optic unit," he said.
Price declined to comment on press reports that Lucent was considering a large convertible bond offering to ease its debt load.
Lucent also is continuing with the sale of its manufacturing plants in Oklahoma City and Columbus, Ohio. Analysts estimate the sale of the two plants could bring Lucent anywhere from $600 million to $900 million and reduce the telecom maker's payroll by 6,000 employees.
The Murray Hill, N.J.-based telecommunications maker has received several bids for the plants and hopes to complete the transaction by the end of its fiscal year, or September 30, Price said.
Lucent must also continue with plans to cut 10,000 employees, said Josepthal's Harris.
Lucent cut its payroll by 2,000 in April and plans to cut another 8,000 by July, Price said. With the 6,000 cuts included in the sale of its plants, the telecom maker will have reduced its staff by 16,000.
Lucent is also confident that it will be able to raise the $2.5 billion it needs before it can complete the planned spin-off of its microelectronics unit, Agere Systems Inc. which went public in March.
As part of the IPO, Agere was to have assumed $2.5 billion in Lucent debt. Lucent had planned to distribute all the shares it owns to shareholders by Sept. 30. After the IPO, Lucent will hold 63.3 percent Class B shares and 87.3 percent of voting power.
"We have several ways to raise the money for the Agere spin-off," Price said. 
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