Lucent, Alcatel to ease U.S. security concerns

Lucent and Alcatel plan to place some of Lucent's most sensitive defense-related research under the eye of a separate "proxy board" composed only of Americans and block any French access to government R&D work. This is to appease U.S. government security concerns, which will be a crucial part of negotiations. Both Congress and the U.S. Defense Department have taken a skeptical view to foreign takeover plans of Lucent, fearing that national security could be compromised in the process. A small portion of the Bell Labs' research is directed to classified projects either funded by the U.S. government or designed for its use. During 2005, Lucent spent about $1.2 billion on R&D, and the total funding for government projects was less than $100 million.

The two companies must also figure out details such as which programs fall under proxy control, how their technology could be converted into commercial use and how a combined Lucent-Alcatel would fund the efforts. This could be a complex and time-consuming exercise to reach an agreement. Even after that, the Committee on Foreign Investment in the U.S. would need to approve it. The secretive body recently came under intense fire for its handling of Dubai Ports World's plan to purchase port facilities across the U.S.

For more on this developing story:
- read this Wall Street Journal article (sub. req.)

PLUS: One key factor fueling the merger talks between France-based Alcatel and its long-time American rival Lucent is a looming competitive threat from Chinese vendors such as Huawei and ZTE. Article (Wall Street Journal sub. req.)

ALSO: Alcatel's board will meet on March 30 to discuss the possible merger with Lucent. Article (Wall Street Journal sub. req.)

FINALLY: Alcatel and Thales are pressing ahead with discussions on a possible deal to create a European satellite champion. Article