Lucent Technologies Acquisition of Ascend Communications

Abstract

During 2006, Lucent got merged with Alcatel SA of France to form Alcatel–Lucent. The $13.4 billion deal between Alcatel and Lucent Technologies created a French–American maker of telecommunications equipment with revenues of $25 billion. But the merger was a failure due to cultural differences. In 2016, Alcatel–Lucent was absorbed by Nokia. In October 2000, Lucent spun off its Business Systems arm into Avaya, Inc., and in June 2002, it spun off its microelectronics division into Agere Systems. In 1999, Lucent Technologies Inc. bought Ascend Communications Inc. for $20.3 billion in stock for expansion into the fast-growing Internet equipment industry. The acquisition created a company which became a provider of complete voice and data systems. Under the terms of the deal, each share of Ascend stock was converted into 0.825 shares of Lucent stock. The deal valued Ascend at $89 a share based on Lucent’s price on announcement period which represented a 19% premium over Ascend’s closing price on the day before announcement. Lucent found Ascend’s product mix of powerful switches that direct Internet traffic attractive. This acquisition positioned Lucent Technologies to compete with top networking companies like Cisco Systems and Nortel Networks.