Lucent and Alcatel end merger talks

Executives at Lucent and Alcatel confirmed rumours that they have been in discussions concerning a possible merger, but said on Tuesday that the talks had proved fruitless.

The companies announced the end of negotiations after the US market closed on Tuesday. "The discussions have not resulted in any agreements and have been terminated," said a joint statement. The firms declined to comment further.

Lucent's shares subsequently sunk 10.5 per cent to $8.41 following speculation that shareholders would not receive a premium if an Alcatel takeover did take place.

Industry sources said that Lucent would try and call any deal a "merger of equals", but Alcatel was clearly seeking to acquire Lucent, which racked up $4.7bn in losses in the first half of its fiscal year. Alcatel would have paid about $32bn for Lucent.

The two equipment makers were meeting at Alcatel's headquarters in Paris. Sources had said that a combined company would have been legally incorporated in the French capital but headquartered in Lucent's home town of Murray Hill, New Jersey.

In addition to a strong US presence, Alcatel would also have gained Lucent's Bell Labs research and development arm, as well as its expertise in Code Division Multiple Access wireless technology, and its switching, transmission and core network products.

Lucent, which was spun off from AT&T in 1996, has fallen on hard times amid a string of strategic missteps and profit disappointments that led to a major restructuring and the ousting of chief executive Richard McGinn.

Henry Schacht, Lucent's acting chief executive, has spent the last eight months reorganising the company, initiating several executive shuffles and the layoff of 10,000 employees.

Lucent will continue to run as a standalone company although merger talks with Alcatel and other companies are expected to resurface in the future.