Alcatel in Talks to Buy Lucent to Challenge Cisco

Bloomberg has reported that Alcatel may buy Lucent Technologies to create a communications equipment company with combined sales of more than $25 billion.

“Lucent and Alcatel are engaged in discussion about a merger of equals that is intended to be priced at market,’ the two companies said in a joint statement. Alcatel, based in Paris, has a market value of $21.9 billion, compared with $12.6 billion for Lucent, the largest U.S. maker of phone equipment.

Previous merger talks between Alcatel and Murray Hill, New Jersey-based Lucent broke down in May 2001 after the U.S. company declined to give up control of the combined entity. Shares of Alcatel and Lucent are trading at less than they did a decade ago as the companies fell behind competitors such as Cisco.

Alcatel and Lucent combined could challenge Cisco for the top spot. Cisco had sales in the last calendar year of $26.2 billion. It would also top Stockholm-based Ericsson, the world’s largest maker of wireless networks with 2005 sales of $19.4 billion.

Lucent, whose stock dropped 29 percent last year, is facing mounting concerns of losing out in the growing market for Internet-based communications equipment. Sales unexpectedly fell last quarter, and in January Lucent said demand is slumping in the U.S. and China.