Judging the success of a merger by the performance of the combined company can be a tricky business. If the performance is poor, you can always argue that the two separate companies might have performed even more poorly as standalone businesses. A similar argument might apply to a strong performance: They might have done even better on their own.

With that qualifier in mind, some people in Paris might be scratching their heads and wondering, "What were we thinking?" The regrets, of course, would be over the $11.6 billion merger in 2006 of France's Alcatel SA and America's Lucent Technologies Inc. On Tuesday, when the telecommunications equipment giant reported second quarter results, it showed a steep loss of $802.5 million and said that costs from the merger were still impacting results, particularly in today's climate of severe price competition.

A story on the dismal results on Forbes.com asks, "Was it even worth it in the end?" That story points out that, along with merger-related costs, results suffered from a large writedown on cellular network assets, a sign, it said, that the company's investment in 3G wireless "is not bringing in comparable returns."

The interesting thing about the sorry way this deal has turned out is that so many people had predicted it from the start. Officially dubbed a merger, it was anything but a merger of equals. Alcatel had basicially been doing just fine on its own, save that it wanted a bigger North American presence and was facing the industrywide pressure to consolidate. Lucent, on the other hand, was desperate for a rescuer. With a severely depressed stock price and falling revenues, all indications were that Lucent's troubles went beyond any temporary industry weakness. Even in the months between the time the merger was announced and the day it closed, Lucent's results had deteriorated so rapidly that some people expected terms of the deal to be renegotiated.

It's still early days for this marriage, and things might yet turn around. But judging by the almost nonexistant honeymoon, it was hardly a match made in heaven. —Andrea Orr

Go to April 21, 2006 story from TheDeal.com
Go to story from Reuters
Go to story from Forbes.com

Tags: Alcatel-Lucent, telecom