Alcatel shares jumped Monday on the news that the company will acquire Lucent Technologies for $13.4 billion, or $3.01 a share. The announced merger plan addresses issues including U.S. security concerns and French worries over Alcatel’s satellite interests.

Alcatel shares were up seven percent following the deal, which creates a $25 billion equipment giant. The two companies said Sunday that the merger will save $1.7 billion within three years, based in part on the plan to cut 8000 jobs in combining the two operations. The cuts represent about 10% of the companies’ total work force.

New Jersey residents, already stung by the AT&T merger which moved that company’s headquarters to San Antonio, expressed some dismay over the loss of another major corporate headquarters – the new company will be based in Paris – and the likely job loss there.

"When a corporate headquarters leaves, the major opportunities are no longer in New Jersey," Rutgers Professor DT Ogilvie told the New Jersey Star Ledger. "The best and brightest will want to go to the corporate center."

Among those may be Lucent CEO Patricia Russo, who will lead the combined company, with Alcatel Chairman and CEO Serge Tchuruk becoming non-executive chairman. Alcatel shareholders will own about 60% of the new company.

The naming of Russo as the CEO of the world’s pre-eminent telco supplier took some by surprise given her performance at Lucent of late. Just last week a study conducted by corporate governance advisors Corporate Library cited Russo as having one of the widest gaps between pay and performance in corporate America. Russo collected $17.3 million in total compensation while Lucent shareholders’ five-year return was negative 80%.

Though based in Europe, a combined Lucent/Alcatel will split its business more evenly between continents than either company did on its own. In 2005, half of Alcatel’s revenue came from Europe and only 14% from North America. Lucent is nearly the opposite, taking 66% of last year’s revenues from North America and only 13% from Europe. But combined, they would have reported 35% of their revenue from Europe and 34% from North America.

To address U.S. government concerns over foreign ownership of Bell Labs, which does research for the Pentagon, the companies will create a separate U.S. subsidiary, run by a separate three-person American board of directors that will run the research facility.

Alcatel will transfer its satellite operations to Thales SA, a French-owned defense electronics company in which it will receive a 25% share.

Alcatel and Lucent officials said Sunday they expect the merger to close within six to 12 months.