Amid massive layoffs, a grueling merger, and a lagging stock price, the folks at Alcatel-Lucent
Alcatel-Lucent plans to leverage Qualcomm's
The deal comes amid much criticism of last year's merger of Alcatel and Lucent. Observers feared that the integration would be a major distraction, leaving insufficient managerial bandwidth to execute big contracts effectively. The Verizon deal should calm some of these worries.
The deal might also be a sign that Verizon realizes the importance of making significant infrastructure investments to grow and stay competitive. Its own effort could become a catalyst for even more investments at other carriers.
Verizon has already been spending several billion a year with Alcatel-Lucent, so this $6 billion contract may not be the last. It's also no secret that Verizon has outsized ambitions to build a technically dazzling network, hoping to capture millions of new customers.
Despite its fat new contract, Alcatel-Lucent still has challenges. The company's Q1 2005 earnings report was a disaster, including a stunning 12% plunge in revenues.
Reversing this slide will take at least a couple of quarters. Still, it's encouraging that the company's sales team can score big deals. If this momentum continues, Alcatel-Lucent's stock might actually start to boost investors' morale, too.
Get connected to further Foolishness:
Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He is currently ranked 1,590 out of 24,619 in CAPS. The Fool has a disclosure policy.
