On September 7, shareholders approved the purchase of the U.S. Lucent Technologies Inc. by France’s Alcatel sa for $10.5 billion to form the world’s largest supplier of telephone networks (Bloomberg.com, September 7). The massive merger is expected to close by the end of the year, creating the new communications equipment company AlcatelLucent, based in Paris. To help cut costs even while extending its global reach, the combined company intends to cut 9,000 jobs. In a telling indication of which country stands to benefit the most from this takeover, just 52 percent of Lucent’s shareholders approved it, while 85 percent of Alcatel shareholders endorsed the merger (idg News Service, September 7).
The only remaining hurdle is to convince the Committee on Foreign Investment in the United States that the deal won’t jeopardize national security.
Bell Labs, a division of Lucent, is an industrial research lab that handles highly sensitive contracts for the U.S. Defense Department. Originally, there was speculation that Lucent would have to get rid of Bell Labs because of the national security implications of a foreign takeover. Instead, Lucent is forming a separate unit that will work on sensitive government contracts, to be run by U.S. citizens, but still coming under French control with the merger.
Though the new company hopes to be more competitive and benefit shareholders, it wouldn’t change the fact that a foreign country would have a majority stake in what used to be an American company. For the U.S., it means a loss of jobs, loss of control over a telecommunications giant, and loss of ownership of a U.S. defense arm.
Just as Britain is divesting itself of its corporate crown jewels, as we reported last month, so is America. Meanwhile, Europe, with Germany in the lead, keeps buying up strategic foreign companies (see page 11).
Although the sale of Lucent Technologies all by itself is not a crippling blow to the U.S. economy, it does represent a growing trend that is not in America’s national interest. Unfortunately, the true consequences related to the loss of strategic American industries will be most felt when times of economic hardship—or war—come.