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Thu 25 Jan 2007 11:06 AM

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The tricky business of succeeding with M&A

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Proof, if any were needed, that technology mergers are now well and truly back on the landscape comes with a report this week that shows that such mergers totalled more than US$130 billion in 2006.

According to figures published by PriceWaterhouseCoopers this week, merger values in the technology sector hit their highest levels since 2000, at the peak of the dot.com boom.

However, while the merger between French firm Alcatel and US firm Lucent Technologies was the year's biggest, with a value of US$14.5 billion, it is worth considering just how well the newly-created firm is doing right now.

Alcatel-Lucent earlier this week said it failed to make a profit in is fiscal fourth quarter, with CEO Patricia Russo (pictured) claiming this was due to the impact the merger has had on its operations. "In the past few months, these moves created short-term uncertainty for our customers and for our people as we worked to develop the combined company's product portfolio and new organisation structure," she said in a statement this week.

The harsh truth is that mergers and acquisitions are tough to get right and can take a long time to deliver results.

One firm that has gone down the merger route is HP, which last year broke through the US$90 billion revenue mark for the first time in its history - overtaking rival IBM in the process. However, since its 2002 merger with Compaq, the firm has endured some tough times, axing former CEO Carly Fiorina - who pushed through the merger - in the process. Which, if nothing else, should make CEOs think twice of the wisdom of such deals - however fashionable they may currently be.

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