Is There Any Hope Left for Alcatel-Lucent?

Senior Technology Analyst Eric Bleeker and Chief Technology Officer Jeremy Phillips discuss the future prospects for Alcatel-Lucent, a company that's attracting investor interest because of its fast-fading share price and potential for big investing gains if the company can turn it around. 

After Alcatel's press release began with cost reductions, investors could have guessed that there would be trouble ahead. While Alcatel brags about leadership in many next-generation segments, price wars and intense competition, led by companies such as China's Huawei, is killing its ability to stem its cash burn. This isn't the only problem for Alcatel, as its traditional areas of strength are on the decline. Wireless, its largest network segment, is seeing the biggest year-over-year declines. The company claims leadership in next-gen network technologies such as IP solutions, but if that's being overridden by drops in traditional areas of sales, that's a net loss Alcatel can't easily recoup. Its "adjusted" operating loss was only 31 million euros, but more important losses continued to widen.

Take, for example, cash burn: At the end of this quarter, net cash was only 236 million euros, while the quarter before it was 753 million euros. This rapid deterioration is an ominous sign for Alcatel’s turnaround attempts. Even near $1, where the company is effectively priced to go under, Eric advises avoiding Alcatel in favor of better investments and recommends staying out of telecom equipment plays in general.

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Eric Bleeker, Jeremy Phillps, and The Motley Fool have no positions in the stocks mentioned above. Motley Fool newsletter services recommend F5 Networks. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On August 05, 2012, at 9:50 PM, kartgv wrote:

    There's no help for my ALU situation! I inherited Lucent when my father died in 1999. My cost basis for that stock is the price on the date he died, which was $59.06. Because he had no will, the estate was not distributed until 2001. Because the stock had already fallen significantly by then, I held on to it. On 12/1/2006, my shares of Lucent were converted to shares of ALU as a result of a merger with Alcatel (1 share Lucent = .1952 shares of ALU). My cost basis then became $306.427/share. I'm now afraid to sell the shares I have, because the enormous loss will likely trigger an IRS audit - and it's not worth the risk. Moral of the story - have a will or a trust!

  • Report this Comment On August 06, 2012, at 6:46 PM, meyer3108 wrote:

    I'm confident that Alcatel will bounce to at least 2$ before the end of the year even though it's a specultaive value. I even see it burning to 5$ by end of 2013. So just be patient ! Keep in mind that Alcatel is a huge telco manufaturer with a large base of customers around the world. Most competitors are interetsed to buy Alcatel ...so I'll go for a speculative buy

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