3 Reasons to Buy Alcatel-Lucent Today

Telecom equipment giant Alcatel-Lucent (NYSE: ALU  ) has its fair share of critics and some real issues to overcome. But there's also opportunity hidden in the company's many problems. I can think of three reasons why Alcatel might be a terrific buy right now:

Deep, deep value: Trading at just more than $1.50 per share today, Alcatel has taken a 75% beating from the 52-week highs set last summer. The stock fetches about one-fifth the P/E and price-to-sales ratios of chief rival Ericsson (Nasdaq: ERIC  ) . At just 2.2 times trailing earnings, Alcatel is priced for absolute disaster, and anything else will propel the stock to dramatic gains.

Rich experience: This ain't Alcatel's first rodeo, pardner. The company came back swinging from the 2008 and 2009 crisis, but so did the entire networking sector. More to the point, buying this stock in the summer of 2010 would have bagged you an easy double in six months, as Alcatel overcame the skeptics with solid earnings and an impressive equipment contract when global giant Telefonica (NYSE: TEF  ) bolstered its 3G coverage in high-traffic public areas. Speaking of which...

Still relevant: Rumor has it that AT&T (NYSE: T  ) is looking to build a network of extremely local mobile base stations, known as femtocells. Where does Ma Bell turn for such an important project? Why, to established leaders Ericsson and Alcatel-Lucent, of course -- just like Telefonica did. Low-cost Chinese providers may look like threats, but Alcatel still owns mindshare among the equipment buyers who really make the market.

This is not an official buy recommendation, of course. But investors could do well by betting against Mr. Market sometimes, and these three points seem to get lost in the general Alcatel discussion. Some elite investors never look stupid, even when they go all in on seemingly hopeless bets. You wouldn't believe what those geniuses are buying today while everyone else is selling.

Fool contributor Anders Bylund holds no position in any of the companies mentioned. Check out Anders' holdings and bio or follow him on Twitter and Google+. The Motley Fool has a disclosure policy.

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Read/Post Comments (8) | Recommend This Article (10)

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  • Report this Comment On June 25, 2012, at 4:23 PM, leohaas wrote:

    "Telecom equipment giant Alcatel-Lucent (NYSE: ALU ) has its fair share of critics and some real issues to overcome."

    True. It was that way before the merger, and it remained that way after. I worked in the industry for a decade and a half, and it was never any different. I sincerely hope I am wrong, but I stopped believing in this company a long time ago. Not even the "quick double in six months" changed that, since all of those gains (and then some) have been given up.

  • Report this Comment On June 25, 2012, at 5:24 PM, piinob wrote:

    How the Mighty have fallen. I remember when Lucent meant cutting edge latest and greatest infrastructure. Still I don't think they are out yet.

    Alu recently introduced a new server for the infrastructure side that is faster, carries higher volume, and uses less power than the competition. With ISP's complaining of overload this looks like a slamdunk easy double or better over the next 12 months. At these prices how can you not get a piece of it?

  • Report this Comment On June 25, 2012, at 7:53 PM, muli888 wrote:

    Highly manipulative stock, keep dropping price to lure you in, bribed tons of analyst kept saying good words about potential gain on the company. It's no where to go but hell, sooner or later they will come up a reason to file bankruptcy to screw small investors. Stay away, I have lost tons of money over the year, you would be a fool to believe any analysts try to convince you to buy it. The company is currently designed to sink.

    SEC should investigate in this company, I am sure a bunch of people should be arrested for manipulation acts. Disgraceful!!! Stay Away!!!

  • Report this Comment On June 26, 2012, at 1:24 AM, serge9 wrote:

    SEC should investigate in this company?

    what Sec!, the SEC, is just a name, to make small investores secur beliving that there are Rules that must be respected,

    any way, honesty is not one on them.

    Nortel management did the same, promising this and that, just to allow big Sharks to eat as much of the small fish as possible, then They declared banckruptcy and the CEO left with 10 million compensation for driving Nortel to bankruptcy!!!

    analystes are paid propaganda, to help drive sharec price in one direction, sham on them all

    it is Truly disgrasful..

  • Report this Comment On June 26, 2012, at 1:33 AM, serge9 wrote:

    off course ALu managment are working hard to Sink it slowly, while they are paid handsome pay for getting the job Done

    SEC should investigate in this company

    Cisco (profitable) cut 10,000 employees

    Nokia Cut 10,000 employess

    other (profitable) telecom cut 25% of work force

    Alu ( lossing big Bucks) cut 1,800 employees

    of course mangment are working to sink it

    analysts, Alu managments, Big investors are all one gang, working together to fill each other pockets will sinking Alu, Sad story

  • Report this Comment On June 26, 2012, at 10:49 AM, vaderblue wrote:

    Alu, I am in but not because of this article.

    Alu has plenty of cash.

    The stock trading below book value of 2.40

    Bankruptcy is it was to happen, you can make money here.

    A buy out and you can make money.

    I see a real opportunity here to make profits.

    There new server will generate much cash.

    That is four more reasons. Neot to mention a decent EPS.. Wait for the June report if you are concerned bit I believe the price will be around


  • Report this Comment On June 27, 2012, at 6:09 PM, r00kie888 wrote:
  • Report this Comment On July 17, 2012, at 10:44 AM, arizonamike303 wrote:

    Bwa ha ha ha ha ha ha ha ha ha ha ha ha ha.

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