IE 11 is not supported. For an optimal experience visit our site on another browser.

Report: Ericsson eyes buying Lucent

Mobile telephone network equipment maker Ericsson said on Monday it would not comment on a report it had once looked at buying Lucent and was thinking of renewing its interest after the U.S. group started merger talks with Alcatel.
/ Source: Reuters

Mobile telephone network equipment maker Ericsson said on Monday it would not comment on a report it had once looked at buying Lucent and was thinking of renewing its interest after the U.S. group started merger talks with Alcatel.

Analysts saw a deal between Ericsson and Lucent as being unlikely. They said that even Lucent's dominance of the CDMA market in the United States would not be enough to tempt the Swedish group as that was a business facing long-term decline.

The report linking the two was in the Times, which on Saturday cited "city sources" as saying Ericsson Chief Executive Carl-Henric Svanberg had once suggested to the board of the Swedish tech giant that it make an offer for Lucent, but that the idea had been rejected.

It said that the Swedish firm was now expected to make a counter-offer for Lucent given the prospect of an Alcatel deal.

"We never comment on that kind of speculation," Ericsson spokeswoman Ase Lindskog said.

Analysts have said a merger of Lucent Technologies Inc. and Alcatel could trigger a wave of consolidation in the market for communications equipment as manufacturers look for ways to cut costs and broaden their product lines.

But analysts saw little chance of an Ericsson-Lucent deal, even if Svanberg during his time at Assa Abloy, where he was before Ericsson, was often on the acquisition trail.

"That is exceedingly unlikely to happen," said Dresdner Kleinwort Wassersten analyst Per Lindberg.

"Lucent has hardly anything to contribute to Ericsson."

He said that the CDMA market, the dominant mobile phone technology in the United States, was a business facing decline.

Bengt Molleryd, analyst at Nordea, agreed, saying that CDMA was losing out to GSM. "It is probably not priority number one," he said of Ericsson's likely view of buying Lucent.

He said Ericsson's main need was to increase its offering to operators in the new markets of Internet Protocol technology in the fixed-line area, which he said was not Lucent's forte.

It was to strengthen its fixed-line offering that Ericsson recently agreed to buy British firm Marconi for $2 billion.

Another analyst, who wished not to be named, agreed.

"I am skeptical about the idea of Ericsson needing to buy size. They are already big in the mobile sector, though not in fixed line. However, it is more likely that they will buy products and technology rather than market share," he said.

Ericsson has also said that it is aiming at small to medium-sized deals, whereas Lucent's market capitalization is around $12.6 billion.

Lucent and its larger French rival said they had returned to the bargaining table, having failed to reach a deal in 2001.

Analysts have named other likely merger candidates as Tellabs Inc., Ciena Corp., Sycamore Networks Inc. and ECI Telecom Ltd.

Siemens AG, which has revamped its management team, and Nortel, could be logical partners, analysts said. Other deals could include industry heavyweights such as Cisco Systems Inc., Motorola Inc. and Nokia.