The Lucent-Alcatel Merger: Part 2

I discussed the Lucent takeover by Alcatel the other day in a post- no point in pretending it's a "merger" at this point.

Upon having a little more time today, I went to Yahoo and produced some total return charts for Lucent, Alcatel and the S&P500 index. The time periods I looked at were 5 and 14 years (9 for Lucent).

Not surprisingly, the total return chart for both firms over the last 5 years are nearly identical, and woefully underperforming the S&P nearly every year. Both had such a disastrous decline in 2001-02 that 2003 was better than average just because, evidently, they didn't go out of business. However, both companies have been consistently inferior performers.

For the longer periods, each company again significantly underperforms the S&P for the entire timeframe. While each temporarily outperformed the index for 1996-2000, this was, of course, a function of the double-counted and excessive demand for telecom equipment preceding the collapse of the late '90s tech boom. Each again experienced a brief period of outperformance during the reflexive snap-back of 2003-4, after losing 75% of their market value in a little over a year.

What is evident to me is that neither company is now, nor has ever been, a consistently superior-performing company among their large-cap peers. Even at their best, these companies simply filled orders, riding a swelling tide of demand, rather than intelligently managing their businesses for sustainable, long-term growth.

Given the sub-par performance of both companies, doesn't it make you wonder why so much air time and/or ink is being spent on this combination? And why nobody seems to be asking how Pat Russo, based upon her dismal track record running Lucent, could possibly take the combined firm somewhere, performance-wise, neither company has ever been before?