Is The Telefonica Deal Alcatel's Silver Bullet?

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Alcatel Lucent (UNKNOWN: ALU.DL  ) is in dire straits. The maker of telecom-grade networking equipment is cutting costs, looking for short-term financing, and generally struggling to make ends meet.

So it's great news when a global telecom picks Alcatel equipment for a next-generation network upgrade. That's what happened last week, when Spain-based telephony giant Telefonica (NYSE: TEF  ) settled on Alcatel's 7950 XRS series of megarouters to run its backbones in Argentina and the Czech Republic. Other markets might follow later -- Telefonica is a sprawling brand with nearly worldwide operations.

Fellow Fool Rich Smith waxed poetic about the equipment deal's importance to investors: "For investors in the Franco-American telecom equipment giant, hope of a turnaround springs eternal. Today, it might even be justified."

It's certainly not bad news. Every sale is money in the bank, and Alcatel could use some street cred. If Telefonica expresses satisfaction with its new Alcatel routers, others might follow suit. The company's largest customers are American powerhouses AT&T (NYSE: T  ) and Verizon (NYSE: VZ  ) , but don't forget about potential sales to other non-U.S. titans. Vodafone (NASDAQ: VOD  ) , Deutsche Telekom, and France Telecom (NYSE: ORAN  ) also operate planet-spanning networks, and they'd be silly not to take Telefonica's experiments into account when cooking up their own next-generation infrastructure orders. Down that path lies Alcatel's potential to make a full recovery.

However, I would also note that Alcatel hardly grabbed the entire Telefonica account. Cisco Systems (NASDAQ: CSCO  ) remains a major supplier for Telefonica's back-end needs, and the telecom is buying Cisco's top-of-the-line CRS-3 routers alongside those hefty Alcatel systems.

I like the way Alcatel is handling the current cash crunch crisis, and the Telefonica deal is another positive sign for hopeful long-term investors. That said, it's not a game-changing signal to back up the truck. Alcatel Lucent is a compelling turnaround play, but a risky one that needs to be handled with care. 

Once a high-flying tech darling, Cisco is now on the radar of value-oriented dividend lovers. Get the low down on the routing juggernaut in The Motley Fool's premium report. Our report also has you covered with a full year of free analyst updates to keep you informed as its story changes, so click here now to read more.

Read/Post Comments (1) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2147218, ~/Articles/ArticleHandler.aspx, 10/21/2016 7:53:41 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 10 hours ago Sponsored by:
DOW 18,162.35 -40.27 -0.22%
S&P 500 2,141.34 -2.95 -0.14%
NASD 5,241.83 0.00 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
ALU.DL $0.00 Down +0.00 +0.00%
Alcatel-Lucent CAPS Rating: ****
CSCO $30.16 Down +0.00 +0.00%
Cisco Systems CAPS Rating: ****
TEF $9.94 Down +0.00 +0.00%
Telefonica CAPS Rating: ****
ORAN $15.25 Down +0.00 +0.00%
Orange CAPS Rating: ****
T $38.65 Down +0.00 +0.00%
AT and T CAPS Rating: ****
VOD $27.82 Down +0.00 +0.00%
Vodafone CAPS Rating: ****
VZ $49.14 Down +0.00 +0.00%
Verizon Communicat… CAPS Rating: ****