1 Key Opportunity for Alcatel Lucent SA

Small cell adoption is on the rise as carriers seek cost-effective ways to boost cellular performance in specific areas. Can Alcatel Lucent continue to ride the rising tide?

Jun 10, 2014 at 11:31AM

It may not be much now, but the market for LTE-based femtocells is taking off. Market researcher Infonetics estimates that the market will reach $2.3 billion by 2018, which is major growth opportunity compared to where the market currently stands. The market is still modest overall right now, bringing in just $144 million in the first quarter, representing 6% sequential growth.

Alcatel Lucent (NYSE:ALU) is already one of four market leaders by revenue, duking it out with the likes of Airvana, Cisco Systems, and ip.access.

A

Airvana Small Cell. Source: Airvana.

Residential deployments still comprise the majority of the small cell market right now, but enterprise adoption is starting to rise precipitously. The company estimates that 70% of enterprises experience poor mobile performance indoors.

Alcatel Lucent is keenly aware of the rising tide, as CEO Michel Combes detailed the company's efforts to refocus the wireless business on 4G LTE and small cells on the last conference call. In fact, this transition has helped the company dramatically improve the performance of its wireless access division.

Wireless access revenue was a third of consolidated revenue and is the biggest part of the access segment. Adjusted operating losses narrowed significantly in the first quarter to $50 million. That helped the segment's adjusted operating margin improve from negative 7.8% to negative 2.4%.

Within the femtocell market, LTE-based small cells bring in the most revenue per user and are helping drive growth. Older W-CDMA-based femtocells are still dominant in terms of units, but that technology is on the decline. Combes also mentioned on the call that Alcatel is working to reduce its exposure to legacy technologies.

Alcatel Lucent is enjoying traction in North America, which is a high-density market. Verizon Wireless deployed Alcatel Lucent small cells to improve LTE performance in several high-traffic environments in February. Small cells are the next evolution of cellular network infrastructure and will play an increasingly larger role in delivering mobile data.

Instead of spending billions of dollars on large macro site cell towers, carriers can use femtocells as cost-effective ways to increase performance in selective areas that are prone to poor performance. That includes high-traffic areas like shopping malls or entertainment venues.

This market won't go uncontested, though. Ericsson (NASDAQ:ERIC) is jumping in with both feet. Ericsson showed off its "Dot" at CES earlier this year, and shortly thereafter announced Vodafone as its first customer. Ericsson is larger and more profitable than Alcatel Lucent, so it may be able to chip away at its smaller small-cell rivals.

Small cells are huge, but are you ready for this $14.4 trillion revolution?
Have you ever dreamed of traveling back in time and telling your younger self to invest in Apple? Or to load up on Amazon.com at its IPO and just keep holding? We haven't mastered time travel, but there is a way to get out ahead of the next big thing. The secret is to find a small-cap "pure play" and then watch as the industry -- and your company -- enjoys those same explosive returns. Our team of equity analysts has identified one stock that's ready for stunning profits with the growth of a $14.4 TRILLION industry. You can't travel back in time, but you can set up your future. Click here for the whole story in our eye-opening report.

 

Evan Niu, CFA owns shares of Apple. Evan Niu, CFA has the following options: long January 2015 $65.71 calls on Apple and short January 2015 $68.57 calls on Apple. The Motley Fool recommends Amazon.com and Apple. The Motley Fool owns shares of Amazon.com and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers