FOOL ON THE HILL
Lucent's Secret Correspondence Revealed

This parody offers one possible explanation of how the Lucent-Alcatel deal was born, how it grew up, and how it died. It turns out that management actually has to do something to earn its pay.

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By Brian Lund (TMF Tardior)
May 31, 2001

The following is a completely fictitious account of the entirely made-up email negotiations between Lucent Technologies (NYSE: LU) and Alcatel (NYSE: ALA). It represents one possible reality, though it is entirely too honest to be true.

From: Bill Spilingup, Corporate Relations, Lucent Technologies
To: Nortel (NYSE: NT); Alcatel
Cc: AT&T (NYSE: T)

Dear Sirs,

You'll remember us from the former competition we used to offer you in the networking market. Said competition having disappeared because of changing marketplace realities, we were wondering if any of you might be interesting in creating a synergistic partnership of equals based on an integrated solutions platform of services....

Aw, heck, let's cut to the chase. It's not looking good over here. Does anyone want to buy us? AT&T, we know about the spin-off and all, but there's still time to reconsider at substantially the same price.

Please reply with serious offers -- not to say that they have to exceed our share price, but you have to mean it.

Thank you,
Bill Spilingup
Corporate Relations

From: Pepe Le Chance, Corporate Liaison, Alcatel
To: Bill Spilingup

Cher Colleague,

It is with the interest that I read your email. While we are having the difficulties also, we have not -- how do you Americans say? -- screwed up as badly as have you. The ease with which you have parleyed a $230 billion company into a $28 billion farce is formidable. On the other hand, we've taken Alcatel from a bloated behemoth involved in a ludicrously wide range of industries to a focused, disciplined company whose shares have risen 80% since January 1, 1999. Our CEO is tr�s fond of fixing broken companies.

Donc, we are able at this time to make an offer for your company, under the right conditions. The main one, naturellement, is that we not pay any more for Lucent than any but the very oldest shareholders paid. Actuelly, we find the current share price to be like mousse chocolat at an imitation French restaurant -- too rich for the discerning palate. We would propose a price slightly lower, in the region of $7 per share, and complete abolition of your management and board.

Respondez, s'il vous plait, at your earliest convenience.

V�tre,
Pepe

From: Bill
To: Pepe

Dear Pepe,

Thank you, thank you, thank you for your warm, encouraging letter. We at Lucent would love the opportunity to work with your fine organization. First, we think that the potential business synergies are substantial. Second, we relish the thought of engaging in negotiations while dining on frogs' legs and brioche. Our CEO is a Francophile from way back.

The price you quote is perfectly acceptable to the board. We've repriced all our options below the stated level, so there's no problem there. As to the other so-called "shareholders" of the company, well, most of them are old grannies, who got the stock as a spin-off from AT&T. They've never had a clue.

With regard to the board and management, however, we had a different proposal in mind. Like in any separation, as I'm sure you in France agree, it's important that all parties be able to maintain the lifestyle to which they have become accustomed. In that spirit, we expect all members of our board be transferred to Alcatel's board. You'll be happy to know that we've already chosen a beautiful chalet in the French Alps, where the board can meet during ski season. In the spirit of �galit�, we'll leave the summer retreat to your discretion.

Also, Lucent's upper management will need accommodation in the joint business. We feel that we've earned top positions at Alcatel, considering the outstanding work we've done creating value for Lucent's insiders. In addition, since we're American and you're French, and therefore nobody likes you, we will add much needed credibility to your company. I look forward to receiving a detailed executive compensation package.

So that you might not object to our requests for managerial and board compensation, we'll reduce the share price of the transaction to $6.90. On this point, as you see, we are perfectly open to negotiation.

Paris in the springtime, here we come!

Bill

From: Pepe
To: Bill

Monsieur,

We find your counter-offer of $6.90 most pleasing. With regards to your management team, however, we think that you have misunderstood our intentions. We feel, as does any objective observer of the situation, that your current management and board are the ones responsible for the debacle at Lucent.

You managed to lose $3.7 billion in the first quarter of this calendar year. We, on the other hand, made 210 million Euros in genuine profit. You are infamous for handing out loans like a drunken sailor to any cheap little telco that comes begging. To let you retain positions of influence at Alcatel would be as foolish as allowing a megalomaniac to rise to power in the wake of a revolution. We will not make that mistake a second time.

You are in huge trouble, mon ami. I do not think even you have confidence that you can work it out. You could take our proposal for the sake of your shareholders, or you could selfishly sink this deal over concerns about your own jobs. The choice is yours.

Bon Chance,
Pepe

From: Bill
To: Pepe

It's true that our market cap has fallen faster than you people surrender to Germany every generation or so, but that doesn't mean you have to get snippy and actually hold us responsible! Let's talk about this reasonably. We could throw a few people overboard, sure, but the real fault for our problems lies with the line workers and other employees, most of which we can lay off! So, help out a brother here. We're willing to split the board half and half, and jettison maybe 10% of our execs.

Bill

From: Pepe
To: Bill

I cannot help you. It seems that you and your shareholders must go down together. Perhaps that is as it should be.

P.

Brian Lund owns no shares in the companies mentioned, and you can be sure he won't anytime soon. The Motley Fool is investors writing for investors.