Alcatel, GEC Buy Into Internet Market                     
                     (European Telecom; 04/14/99)                     

  Apr. 14, 1999 (EUROPEAN TELECOMMUNICATIONS, Vol. 17, No. 5 via COMTEX) -- 
Hard on the heels of an agreed purchase of California-based data switching 
specialist Xylan Corporation for $2 billion, French equipment manufacturer 
Alcatel has revealed plans for a second major acquisition - both deals being 
aimed at strengthening Alcatel's position in the fast growing data networking 
market. The second takeover is expected to be in the field of remote access, 
the only substantial data networking market segment not covered by the Xylan 

 Alcatel started a drive to bolster its position in Internet technology last 
October by taking over another US company, Packet Engines, for $315 million. 
The deal with Xylan is described by Alcatel chairman Serge Tchuruk as, "a major 
step" in the company's strategy of becoming a worldwide player in the Internet 
field, while Xylan president said the "synergies from combining our technology 
with Alcatel's resources will provide a dramatic boost to Xylan's future 

 The financial markets reacted favourably to the deal, some analysts suggesting 
that it would "fill some of the holes" in Alcatel's data networking product 
portfolio - adding that with the threat from Lucent Technologies, Cisco and 
Nortel becoming ever stronger the deal was becoming increasingly necessary. 
Xylan and Alcatel have been long term partners and Alcatel first invested in 
the US company in 1995. Prior to the takeover it owned 5% of Xylan stock.

 General Electric Co (GEC) of the UK has also made a major US purchase designed 
to boost its standing in the telecommunications and Internet markets. Its $2.1 
billion agreed takeover of Reltec Corporation - a US networking products group -
 has been financed from the Pounds 7 billion sale of its defence electronics 
business to British Aerospace early this year.

 Cleveland based Reltec produces cables and equipment for both power 
transmission and communications, and is thus considered a natural fit with GEC -
 linking the British company's traditional markets with its declared intention 
to build up its telecoms operations. Reltec is best known for its 
communications products, in particular its digital loop carrier technology 
which connect copper telephone lines to high speed fibre cables. The company 
has around 15% of the $2.4 billion US market for these products and GEC 
believes that its position will help Marconi Communications (formerly GPT, now 
a wholly-owned GEC subsidiary) to establish itself in the North American 

 The Reltec deal is likely to help deflect arguments from detractors who have 
suggested that Marconi Communications is too small to compete with the likes of 
Lucent or Nortel, despite being pre- eminent in optical communications and in 
some data and Internet technologies.

 GEC has also sought to allay fears that Reltec is too small an acquisition, 
partly by suggesting that in the Internet/communications market "it's not who's 
the biggest, but who's the quickest", and partly by noting that the parent 
group, even without the sale of the defence side, is sitting on a cash mountain 
which it intends using to judiciously build up its presence in the global 
communications markets.

 GPT Payphone Systems, a Liverpool-based division of Marconi Communications has 
strengthened its position in the global payphone market by acquiring a 100% 
interest in Tetrel Ltd, of Llantrisant near Cardiff, described as one of the 
world's leading manufacturers of indoor payphones. Tetrel was formed in 1987 
and currently sells some 100,000 units per year, giving it a 66% of the UK 
market and rapidly expanding world sales - which GPT expects to enhance through 
its presence in 85 countries worldwide.

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