November 4, 2011
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of embattled telecom equipment supplier Alcatel-Lucent (NYSE: ALU ) plunged 18% on Friday after its quarterly results and guidance disappointed Wall Street.
So what: Alcatel-Lucent's third-quarter sales didn't miss by a whole lot (3.8 billion euros versus the consensus of 4 billion euros), but plans for even more restructuring suggest that the company is suffering from much more serious structural problems than previously thought. In fact, the shares are busting through their 52-week low on today's news and are down a staggering 65% over the past six months alone.
Now what: Don't expect a results-driven turnaround anytime soon. Given all the uncertainties and selective customer spending, particularly in Europe, CEO Ben Verwaayen warned of "weaker revenues than initially planned in the fourth quarter of 2011" and said that a forecast for 2012 would be impossible. So if you have to play in the space, competitors like Cisco (Nasdaq: CSCO ) and LM Ericsson (Nasdaq: ERIC ) are probably safer ways to go.
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