Alu pl up


Published on

alcatel lucent negotiations

Published in: Business
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Alu pl up

  1. 1. The Alcatel-Lucent case Negotiation Course 2010
  2. 2. Content <ul><li>CONTENT </li></ul><ul><li>Introduction </li></ul><ul><li>the main activities </li></ul><ul><li>the history </li></ul><ul><li>the situation for Alcatel in 2001 </li></ul><ul><li>the situation for Lucent in 2001 </li></ul><ul><li>why merge? </li></ul><ul><li>the negotiations 2001 </li></ul><ul><li>the negotiations 2006 </li></ul>
  3. 3. Fields of Activities/Markets <ul><li>Main Activities </li></ul><ul><li>Applications, platforms and servers for fixed / mobile / Internet </li></ul><ul><li>telecommunication </li></ul><ul><li>network management, </li></ul><ul><li>transport, defense, health </li></ul><ul><li>cables </li></ul>
  4. 4. <ul><li>ALCATEL S.A. </li></ul><ul><li>1898. Creation of the “Compagnie Générale d’Electricité” in France (CGE) </li></ul><ul><li>Wide range of activities; telecommunication, electronic, electricity, construction. </li></ul><ul><li>Alcatel-Alstom in 1980’s </li></ul><ul><li>1995. Alcatel leaves Alstom and re-focuses on telecommunications </li></ul><ul><li>Lots of new acquisitions in the 2000’s </li></ul><ul><li>LUCENT Technologies </li></ul><ul><li>Ancester of AT&T = Western Electric + Bell Labs </li></ul><ul><li>Responsible for important scientific and technologic discoveries </li></ul><ul><li>1984. Dimerger of AT&T that becomes ATT technologies that will later be Lucent Technologies in 1996 </li></ul>HISTORY
  5. 5. BELL LABORATORIES <ul><li>created in 1925 </li></ul><ul><li>the transistor , the laser, the solar cell, digital signal processor, UNIX. </li></ul><ul><li>over 25.000 patents </li></ul><ul><li>- 11 Nobel-Prices </li></ul>
  6. 6. ALCATEL, THE SITUATION 2001 <ul><li>sold major assets end of the 90ties, generated cash </li></ul><ul><li>Tried to establish on the US market by buying several companies </li></ul><ul><li>Not yet stressed by the rising crisis </li></ul><ul><li>- 100.000 employees worldwide, turnover US$30b. </li></ul>
  7. 7. <ul><li>- performed very well since `96 </li></ul><ul><li>- did major acquisitions the recent years </li></ul><ul><li>- strong competitors like Cisco and Nortel </li></ul><ul><li>- no positive figures the last 18 month </li></ul><ul><li>- new CEO H. Schacht started reorganization </li></ul><ul><li>- looking for an investor, rumors of bankruptcy </li></ul><ul><li>-- 146.000 employees, and turnover US$29billion </li></ul>LUCENT, THE SITUATION 2001
  8. 8. WHY MERGE ? ALCATEL LUCENT Technologies The “problem” or opportunity - Money and the opportunity to grow and to accumulate others. - Access to Bell Labs (patents). - A financially critical situation - To compete with Cisco and Nortel in the US. Objectives - larger US market share and access to the major clients of Lucent like At&T - Get out of a critical situation - Create a global telephone equipment giant on both sides of the Atlantic. - A merger of equals ??? - A merger of equals Alternatives - Stay alone or find other merger possibilities - Finance alone the already started restructuring Consequences - Go on competing against Lucent in the US market - No access to Bell Labs. - No savings due to synergy effects - Loss of market share against competitors in the US - Danger of bankruptcy - No savings due to synergy effects Tradeoffs - No access to Bell Labs or a spin-off of Lucent companies involved in research for the US-Army. - Give full access to Bell Laboratories.
  9. 9. THE ACTORS CEO Alcatel S.A. Serge Tchuruk Board of directors Government Shareholders CEO Lucent Henry Schacht Board of directors Government/US-Army Shareholders
  10. 10. First set of Negotiations in 2001 CHATEAU LES MESNULS (YVELINES, FRANCE) <ul><li>US$22.8 billion payment of Alcatel for a 58% share of the new company </li></ul><ul><li>the new company would be incorporated in France </li></ul><ul><li>headquartered in the USA </li></ul><ul><li>led by Alcatel CEO Serge Tchuruk </li></ul><ul><li>a merger of equals ? </li></ul>The potential agreement formula elaboration Final Negotiations May, 25-27th 2001 50 executives prepare the papers, merger announcement planed for Tuesday
  11. 11. CEOs jointly announced that they were breaking off negotiations and abandoning the deal First set of Negotiations in 2001
  12. 12. First set of Negotiations in 2001 WHAT HAPPENED ? INTEGRATIVE NEGOTIATIONS ? Lucent CEO Harry Schacht felt Alcatel would dominate the new board of directors by 8 to 6 seats a merger of equals The Alcatel Executive Board denied any compromise on their representation within the new company. “ to take over” the acceptable balance was not reached
  13. 13. WHAT HAPPENED AFTER 2001
  14. 14. WHAT HAPPENED AFTER 2001
  15. 15. CEO Alcatel S.A. Serge Tchuruk CEO Lucent Patricia Russo The 2006 negotiations <ul><li>149.000 employees worldwide, </li></ul><ul><li>turnover US$29b </li></ul><ul><li>30.000 employees </li></ul><ul><li>- turnover US$ 9b </li></ul><ul><li>100.000 employees worldwide, </li></ul><ul><li>turnover US$30b </li></ul><ul><li>90.000 employees </li></ul><ul><li>- turnover US$ 16b </li></ul>
  16. 16. The potential agreement formula elaboration The 2006 negotiations <ul><li>US$22.8 billion payment of Alcatel for a 58% share of the new company </li></ul><ul><li>US$13.6 billion payment of Alcatel for a 60% share of the new company </li></ul><ul><li>the new company would be incorporated in France </li></ul><ul><li>the new company would be incorporated in France </li></ul><ul><li>headquartered in the USA </li></ul><ul><li>headquartered in Paris </li></ul><ul><li>led by Alcatel CEO Serge Tchuruk </li></ul><ul><li> led by Lucent CEO Patricia Russo </li></ul><ul><li>a merger of equals </li></ul><ul><li>… </li></ul><ul><li>Bell Labs, would be part of the new company, but led by 3 US citize n </li></ul><ul><li>Bord of directors 8 , 6 </li></ul><ul><li>Bord of directors now 6, 6, and 2 jointly decided . </li></ul>
  17. 17. The 2006 negotiations
  18. 18. S. Tchuruk recalled his near victory five years ago by saying: &quot; I don't know if Henry Schacht is by any chance listening in on this call, but if he is, I would remind him of this time and send him my warmest regards.&quot; conclusion
  19. 19. conclusion <ul><li>- where Alcatel-Lucent would be now if….? </li></ul><ul><li>H. Schacht :” decision trap by sticking to the status quo to achieve a “merger of equals”. </li></ul><ul><li>Or: </li></ul><ul><li>the pride and will to stay accountable </li></ul><ul><li> non-rational decisions of strong characters in leading positions caused a missed opportunity </li></ul><ul><li>Would H. Schacht had accept in 2001 if he would known about the </li></ul><ul><li>crises in its full dimension? </li></ul><ul><li>- integrative negotiation is to identify the most important goals for each participant and to find a solution which fulfills the merger of these goals. </li></ul><ul><li>- $13 $22 </li></ul>
  20. 20. DANKE MERCI
  21. 21. In billions $ Turnover of both companies 2000-2002 <ul><li>Percentage changes in Turnover from 2000 to 2002: </li></ul><ul><ul><li>Lucent : - 62.0% </li></ul></ul><ul><ul><li>Alcatel: - 41.3% </li></ul></ul>Adapted from Carpenter et al., Industrial and Corporate Change, 2003
  22. 22. Environmental factors
  23. 23. <ul><li>Historical Competitors (Ericsson, Nokia, Motorola, Siemens, Nortel) </li></ul><ul><li>Rapprochement Nokia-Siemens </li></ul><ul><li>Nortel et Motorola in Difficulties </li></ul><ul><li>New Competitors </li></ul><ul><li>Cisco, networks equipments leader </li></ul><ul><li>Huawei </li></ul><ul><li>ZTE </li></ul>Environmental factors
  24. 24. Employment in Alcatel & Lucent : 1995-2006
  25. 25. <ul><li>Lucent is stronger in IP Multimedia Subsystem (IMS) architecture, CDMA and services. </li></ul><ul><li>Alcatel is stronger in access and optical markets. </li></ul><ul><li>Lucent has stronger relationships with American carriers. </li></ul><ul><li>Alcatel is stronger in Europe and emerging markets. </li></ul><ul><li>Significant cost savings by eliminating redundancies in their many common areas (access, optical technologies, services businesses). </li></ul>Interests for Merger
  26. 26. New actors in a different Environment, 2006 Merger The main objective of this merger is to generate significant growth of salaries and results. This rapprochement will create values for shareholders from both companies that will get advantages from the strong resulting dynamic. Serge Tchuruk, Alcatel CEO
  27. 28. However, since merger, Alcatel-Lucent only accumulates losses (in M€ on the graph) Alcatel-Lucent results
  28. 29. <ul><li>Still awaiting for synergistic effect </li></ul><ul><li>Teams from Lucent and Alcatel are hardly integrated with each other / Strong Cultural effect + Mistrust linked with important layoff waves </li></ul><ul><li>Important value decline </li></ul><ul><ul><li>Shares values divided by 5 since merger </li></ul></ul><ul><ul><li>Cumulated capital before merger 21 billions € > 15 b€ Shares= 10€ at merger; 2€ now </li></ul></ul><ul><li>This merger mostly benefit the involved CEOs </li></ul><ul><li>P. Russo & S. Tchuruk (Increased salaries, golden parachutes, bonuses) </li></ul>Strategic perspectives
  29. 31. Alcatel-Lucent Merger: Ten Things You Need To Know By David Sims TMCnet Contributing Editor  1. French firm Alcatel ( News - Alert ) SA is in talks to &quot;merge&quot; with Lucent Technologies ( News - Alert ), Inc. to form a $34 billion company -- Alcatel $20 billion, Lucent $17.7 billion -- with annual sales of over $25 billion.                                                                                                     2. The deal would not offer a stock premium to either set of shareholders.     2a. Right, give us that funky quote again -- Alcatel and Lucent are &quot;engaged in discussions about a potential merger of equals that is intended to be priced at market,&quot;     2b. The company would be based in Paris and its CEO would be Lucent's Patricia Russo, according to current speculations. 3 There are three important factors in telecom right now -- consolidation, consolidation and consolidation.      3a. Remember when there were seven Baby Bells? Operating on the old Ottoman Empire's royal principle of killing off all your siblings to consolidate power, there are three now.     3b. Sprint's the only independent long-distance carrier left. Everyone else is getting bigger and bigger.     3c. And this skins Lucent and Alcatel's cats because… &quot;The bigger the (telecom) carriers become, the power shifts more to the customer,&quot; Ping Zhao, a senior telecom analyst at CreditSights told USA Today . 4. They've tried this before. About five years ago Alcatel tried to buy Lucent, which was all for the deal in principle, but couldn’t nail down the management control issues, so it fell apart. A Deutsche Bank investment advisory released today reminds everyone that &quot;the devil is in the details, because there is no transaction as of yet. Just talks. Let’s wait to see how this 'merger of equals' actually gets structured.&quot;     4a. Because, as a wise man once noted, some are more equal than others.     4b. It isn't that Lucent's the prettiest girl on the market -- if the deal goes through the combined entity is still smaller than Ericsson ( News - Alert ), Nokia ( News - Alert ) and Siemens. And there's all that debt and $2.4 billion in unfunded pension and benefit obligations.     4c. But she does have great CDMA, and she's got great family connections: George Calhoun, a professor of business and technology at the Stevens Institute of Technology told USA Today that Alcatel's been trying for 20 years to penetrate the U.S. market.     4d. Her… sales are kinda flat, too. And it's not like her CDMA's a really attractive  long-term asset. Oh well, love is blind. 5. Seeing as how Lucent does between $4 and $5 billion in revenue from selling wireless gear, much more than Alcatel, it's not like she's an ugly old hag. 6. If we wouldn't let a Dubai company take over our ports, why would we let a French company take over Bell Labs?     6a. Shoddop. 7. Ericsson, once linked romantically to Lucent, is forever holding its peace on whether it still carries a torch.     7a. Yeah, wasn't there some gossip in the City of London along those lines?     7b. Those tabloids, there are lots of names floating around. What, somebody has photographs? Ericsson just married Marconi for $2 billion in dowry, this ain't Big Love . 8. The one thing everybody seems to agree on is that there will be more consolidation, with Tellabs and Ciena, for example, looking to be picked up, and Nortel ( News - Alert ) looking to pick someone up, according to Steven Kamman . 9. Let's talk jobs -- or raison d'riot , as they're called in France. Alcatel has over 50,000 of them (insert &quot;fifty thousand Frenchman&quot; punch line here), and Lucent has 30,000, down from 46,000 in 2002. Guess which ones are going to get whacked. Hint: Renaults are a lot more flammable than Fords. 10. Business considerations, aside, it's probably easier to get Southern Baptist Sunday Schools approved in Iran than to get regulatory approval for this deal in Washington right now.     10a. Industry analyst Jeff Kagan says &quot; the issue of foreign ownership of a US telecom firm may raise concerns that will have to be addressed.&quot;     10b. That's a nice way to put it. David Sims is contributing editor for TMCnet. For more articles please visit David Sims' columnist page .
  30. 34. Selon Le Figaro ''Alcatel-Lucent : l'union rêvée de Serge Tchuruk'' , 27 mars 2006, sur l'exercice fiscal qui s'est achevé le 30 septembre 2005, Patricia Russo a gagné 8,4 millions de dollars de salaire et bonus, contre une rémunération globale de 4,2 millions en 2004. De son côté, Serge Tchuruk a touché 2,8 millions d'euros de salaire et primes en 2005, soit une augmentation de 86,7% en deux ans.
  31. 35. Research & Development activities
  32. 36. Introduction <ul><li>Alcatel-Lucent is created in 2006 </li></ul><ul><li>Results from the merger of 2 companies, i.e. Alcatel and Lucent Technologies </li></ul><ul><li>In 2007, occupies the 2 nd international place in telecoms, right behind Cisco Systems but before Ericsson and Nokia-Siemens Networks </li></ul><ul><li>CEO : Ben Verwaayen / Head Quarter: Paris, 8th Arr., FRANCE </li></ul>