Foolish Forecast: Alcatel-Lucent's Dim Glow

Just a few weeks past tax season, French-New Jersey telecom giant Alcatel-Lucent (NYSE: ALU  ) will be filing its second "married, filing jointly" earnings report Thursday. Like most everybody else on the Street these days, we'll be hearing about its first quarter of 2007.

What analysts say:

  • Buy, sell, or waffle? Thirty-seven analysts follow the new Alcatel-Lucent, up two from last quarter. At last report, the conglomerate was getting 14 buy ratings, 13 holds, and 10 sells.
  • Revenues. On average, they're looking for $5.44 billion in sales.
  • Earnings. Profits are predicted to come in at $0.02 per share.

What management says:
Once again, Alcatel-Lucent has made its earnings news an afterthought, reporting preliminary results weeks before the "big news." In April, the company reported that combined-company sales declined a greater-than-expected 8% to $5.3 billion for the first quarter, and that the firm booked an operating loss of $353.8 million on "significant items."

Those who caught last quarter's Foolish Forecast, in which we quoted CEO Patricia Russo predicting "additional actions to further reduce its cost structure" -- which I interpreted as foreshadowing a series of smaller-than-big-bath "corporate sponge baths" -- should not be surprised.

What management does:
Also unsurprising: the likelihood that once the operating results get digested down into a net result-form, we're likely to see a continuation of the trend in deteriorating margins at Alcatel-Lucent. Over the past year, we've seen a nonstop series of quarters reporting declining rolling results at each of the gross, operating, and net margin levels.





























All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Russo promises a brighter future, however, blaming "lower volumes in traditional wireless and core networks at a time when considerable investments were made in the next generation of these technologies," but arguing that as this next generation of technology comes on line, sales will pick up.

Citing blockbuster sales to brand-name customers such as Verizon (NYSE: VZ  ) and China Mobile (NYSE: CHL  ) during the quarter, Russo puts the firm's "book to bill" ratio (contracts expected to generate future revenue, as compared to revenue booked in the present) at 1.3. Logically, if these contracts come to fruition in the future, any book-to-bill ratio in excess of 1.0 means that revenue growth lies ahead. Now we just have to wait and see whether the firm can squeeze sufficient profit from these sales to get its earnings growing again as well.

For more "light" reading on Alcatel-Lucent, flip the switch on:

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Fool contributor Rich Smith does not own shares of any company named above.

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