There are many ways to boost your company's growth and a good acquisition is one of the best - when it works. But there are probably more hard luck stories than success stories on the road to a successful merger. Lucent's very expensive acquisition of Ascend Communications is simply puzzling.
Why buy a company at an inflated rate? By all accounts, Lucent has paid 20% over the odds for the company.
Lucent claims that this is a bold new move to address high-growth opportunities in data networking. It says the merger will put it in a clear position of leadership in comms technology.
Shareholder values may go up in the short term but the difficulty of managing such a huge merger will be the real task, not merging the product and service lines, which will be relatively easy.
Lucent now becomes a worry for Cisco Systems and the new merged company may get on the shortlist of most US companies buying data services but how will the new company perform once it gets to the presentation rostrum?
How many of the new company's staff are going to be happy with the merger?
Since some core Ascend technology is used by Lucent it seems logical to assume that the two companies already work fairly closely together.
Ascend's chief officer seems to be the first casualty of the merger.
He leaves after a "transition period to assure a successful integration of the business". And staff working on the products which overlap will be worrying this week since not only do products overlap with the two merging companies but so do the similar products from Lucent's acquisition of the remote access supplier Livingston Enterprises. And what about its 1998 purchase of ATM concentrator firm Yurie Systems?
This also may be a concerted effort to push into the European market and take on the giant Nortel which, since its acquisition of Bay Networks, seems to be having its own way in Europe. If Lucent completes this merger with speed and precision it could be the competitor that Ericsson and Alcatel need - and may spur them into a little buying spree of their own.
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