Jones Lang LaSalle


Jerseyans likely to feel the pain on jobs, stock

Monday, April 03, 2006
BY BETH FITZGERALDStar-Ledger Staff

New Jersey's economy took a one-two punch yesterday with the announcement that Lucent Technologies will be consumed by France's Alcatel and see the home office re-established in Paris.

Losing a big corporate headquarters means fewer high-paying jobs, reduced contracting opportunities for nearby small-business owners and an end to local decision-making about charitable contributions. Lucent employs more than 6,000 in New Jersey, while the yet-unnamed combined company plans to trim 8,800 jobs, or 10 percent of its global work force.

For Lucent shareholders, the announcement short-circuited hopes of a rebound in the battered stock price. In many mergers and acquisitions, shareholders of the target company receive a double-digit premium compared with market prices.

Lucent investors, some of whom paid as much as $84 a share, found out they stand to receive Alcatel shares under a ratio valuing each Lucent share at $3.01, down from the $3.05 closing price Friday.

With AT&T having been acquired late last year by San Antonio-based SBC and Public Service Enterprise Group set to be sold to Chicago-based Exelon, it almost seems as though the Garden State's biggest and brightest employers are getting knocked out of the ring.

"You always hate to lose a corporate headquarters, but you have to wonder how long the New Jersey jobs would have lasted without this merger," said Joan Verplanck, chief executive of the state Chamber of Commerce. "Maybe they will keep what they have in New Jersey, and it will stabilize and grow. Lucent and Alcatel are both intelligent companies; they need highly trained, educated people, many of whom reside in New Jersey."

Rutgers University economist James Hughes called the Lucent-Alcatel deal "another step in the sustained erosion of New Jersey's high-technology sector that has been going on since 1990."
In a report last year for the state Commission on Science and Technology, Hughes and his Rutgers colleague Joseph Seneca found the state had 9,800 fewer high-tech jobs in 2004 than in 1990.

To attract the start-up high-tech companies that eventually will replace the traditional industrial/innovation firms such as Lucent, New Jersey needs to invest in the research capacity of its universities, Hughes said. "Research universities are the new partners with high-tech companies, which cluster near academic centers of excellence."

Anthony Coley, a spokesman for Gov. Jon Corzine, said the combined company "will undoubtedly need a headquarters for their U.S.-based operation, and because of New Jersey's premier positioning in the telecommunications industry we will aggressively pursue that opportunity."

Lucent's offices are in Murray Hill, a neighborhood that straddles New Providence and Berkeley Heights. Lucent's relentless downsizing during the past few years "has impacted everyone in the area," New Providence Mayor Allen Morgan said yesterday.

"A good many of the people who were downsized live here and they have had to scramble to find other jobs," he said. "And the loss of jobs has hurt the local economy; you have fewer people going out for lunch, getting their cars fixed, shopping at the grocery stores and gift shops -- the impact just goes on and on."

The town has a good relationship with Lucent, he said, and the company has been active in the community and the school system for years. "I'm really optimistic that they will keep the Murray Hill facility and move people here," he added.

Losing a corporate headquarters is a troubling development for any state, said dt ogilvie, professor of business strategy at Rutgers University.

"When a corporate headquarters leaves, the major opportunities are no longer in New Jersey," she said. "The best and brightest will want to go to the corporate center."

And then there is the plight of Lucent investors. It is one of the most widely held stocks across the nation and is held by many New Jersey residents who received shares when the company was spun off from AT&T in 1996 and reached a high of $84 on a split-adjusted basis Dec. 9, 1999.

Few large-cap technology stocks fell as far and stayed down as long as Lucent did in the wake of the worldwide collapse in telecom equipment spending. For the millions of mom-and-pop investors who have held Lucent shares since the company was part of Ma Bell, the pain is more severe.

For generations of investors, AT&T shares -- like those of General Electric and International Business Machines -- were a staple holding in retirement accounts. The stock was also a core holding of growth mutual fund managers during the 1990s, and executives of at least a half-dozen start-up makers of telecom gear acquired by Lucent took its shares as payment.
David Menlow, president of the IPO Financial Network in Millburn, said investors who held on to Lucent stock should have seen this coming.

"People must still think it's the good old days, where you bought a stock and held it to save for retirement," he said. "But there are no guarantees. Those days are gone."

Beth Fitzgerald may be reached at efitzgerald@starledger.com or (973) 392-4111.
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