Late last month, Alcatel scaled back its outlook for this year and said it would outsource mobile handset production to cope with slowing growth. An industry insider whose company has also taken a look at Lucent in recent months said Alcatel was probably interested in Lucent's customers, but would face a daunting integration task were the companies to combine. If they're going ahead it will be two years of hard work. ABN Amro sees significant cost savings Still, the possibility of the two merging is more feasible now than a year ago given the sharp slowdown in the global telecoms industry. Alcatel Chairman Serge Tchuruk has not ruled out consolidation among global telecoms equipment makers as large operators are expected to start snapping up newer rivals.
Markets are eager for a cure to the overcapacity problems caused by the telecoms slowdown.
Analysts at ABN Amro said a combination would dilute Alcatel earnings per share by as much as 75 percent in 2002 before any synergies. This implies that the probability of such a deal being announced is high. Given the risks involved, the market would react negatively. Taking synergies into account, however, could limit the dilution on Alcatel earnings. Custom News ZDNet News brings you a summary of top headlines each business day.