Meeting of network vendors could mean cheaper prices for IT buyers

Network vendors Lucent Technologies and Alcatel are in talks to combine their operations - a move that some experts said could lead to lower prices for IT buyers thanks to economies of scale.

A message on the firms' web sites said: "Lucent and Alcatel are engaged in discussions about a potential merger of equals that is intended to be priced at market. There can be no assurances that any agreement will be reached or that a transaction will be consummated."

A merger between Lucent, which is based in the US, and Alcatel, based in France, was attempted in May 2001, but broke down, possibly over disagreements about how many members of each company should sit on the merged board. A merger now would create the world's biggest comms equipment firm with combined sales of over $25bn.

For IT managers however, a merger could bring long-term price reductions for comms equipment, according to Frank Fabricius, managing vice-president for Carrier Network Infrastructure at analyst Gartner, "In the short term a merger wouldn't really change much in terms of equipment competition with Cisco, but in the long term, they will have stronger combined R&D resources. Also the size of the company will give them some advantages in volume production that could give them maybe a competitive price advantage, but that would be in three to five years."

Fabricius said this would be one of the largest integration projects in history, due to the disparate US and French IT operations. "In the first two years they will spend a lot of time streamlining the company and making a lot of consolidations on the sales side and in production," he predicted.

Meanwhile, a proposed merger between security vendors Check Point and SourceFire has been abandoned after the US began investigating whether the deal would harm national security.

Although industry observers said the two companies would fit well together, a statement from SourceFire said: "Sourcefire today announces that, with the consent of the US government, Sourcefire and Check Point Software Technologies have opted to withdraw their merger filing with the Committee on Foreign Investment in the United States (CFIUS)."