It was billed as a romantic tale of corporate chivalry. As the French telcom giant saw things, it was riding to rescue a Lucent in distress–and could profit, too. The American telecommunications equipmentmaker was saddled in debt and burning through cash, fast. But lo, Alcatel turns out to have big problems of its own. Witness the fact that when talks broke off last week, it issued a warning that profits would fall short of expectations, sending its already battered stock down 10 percent. Then on Friday, Alcatel said it would fire 900 of its U.S. employees. Had Lucent accepted the French offer to sell out (for stock equal to Lucent’s market price), its shareholders would have scored a 10 percent loss before the ink was dry. Instead of a “take-over” at a premium price, Lucent would have suffered the ignominy of a “take-under,” a feat not likely to have won Wall Street applause.
The surprise isn’t that the talks broke off, but that they got so far along before collapsing. In any combination, especially when both sides are losing money, someone has to run the show and make the necessary cuts. If you can’t decide who, you have nothing to talk about. What seems to have happened here is that these Einsteins decided to leave that pesky detail to the end, hoping the other would give. Neither did; the deal went kaboom. The thought of all this high-priced negotiating talent never settling Point One is enough to make you giggle. Could Inspector Clouseau have been in charge?
