MIKE QUIGLEY, ALCATEL

Mike Quigley talks about Lucent Technologies with a much fonder tone than you'd expect from an executive with one of Lucent's major competitors. It's not that he's soft on the competition. If he had it his way, they would one and the same company. Alcatel's bid to acquire Lucent and its near mythical Bell Labs research facilities failed two years ago, but Quigley claims the deal was a hair's breadth from closing.

“It was almost there,” said Quigley, President of Alcatel North America and the No. 3 man in Alcatel's ruling circle. “In hindsight, acquiring Lucent would have been tough. Both companies would have faced major restructuring and there would have been a lot of overlap, but I still think it would have been a great acquisition for us.”

According to Quigley, the acquisition would not have benefited the whole industry. The reason? “There are just too many players and not enough business to go around,” Quigley said. “Consolidation is necessary.”

It's a tough market, and the giant vendors have all felt the sting of dwindling capital expenditures and the disappearance of some carrier customers. Like its rivals, Alcatel has downsized, cut product lines, consolidated manufacturing and exited some businesses entirely, all the while watching its revenues shrink. Quigley maintained that Alcatel has fared better than most, but he was still caught off guard by the severity of the downturn.

“While we were probably the most conservative of the vendors, we had no idea economic conditions would get this bad,” Quigley said. “We thought we'd definitely see a recovery before the second half of 2003. Now we have no idea if it's going to be there. If we had been a stand-alone optical business, we would have been dead by now.”

The end result is the world's largest vendors fighting tooth and nail for the remaining business. Alcatel's revenues have plummeted just like everyone else's, especially in the optical space. Even its vaunted ADSL product line took a big hit when the RBOCs practically halted broadband expansion in 2002.

“There's not much you can do about the market, except carefully watch it,” Quigley said. “While we can't increase carrier spending, we can certainly try to increase our overall market share. We've been largely successful doing that.” Alcatel's already dominant position in DSL access grew stronger, partially thanks to companies such as Nortel Networks and Nokia exiting their access businesses entirely. And while Alcatel did exit businesses of its own, it didn't cut whole divisions. Instead, it trimmed optical cross-connects here and DSL customer premises equipment there, Quigley said.

Being part of a giant multinational with fingers in technologies across the board also helps. GSM and GPRS buildouts in other parts of the globe, as well as development in Asia, helped offset ailing sales in North America.

But in Alcatel's particular case, being a multinational might hurt it. The Iraqi War backlash against Alcatel's home country of France produced political sentiment against buying Alcatel-made equipment.

Quigley, however, writes off such knee-jerk political maneuvering. Alcatel hasn't seen any effect on its sales since the war began, he said, and Alcatel has enough employees in North America to make it just as much a U.S. company as it as French one. “We're a true multinational,” Quigley said. “I'm the perfect example of it. I'm an Australian with a British passport living in the U.S.”

The only war that presents a problem for Alcatel is the one it continues to wage with the likes of Lucent over an amount of territory that continues to dwindle.