The Dow closed out a week of continuing gains and now sits just 103 points away from hitting its 52-week high. But with the companies below going down hard, first let's see whether they had good reason to drop. Sometimes, panic-fueled declines can make excellent buying opportunities.
A disconnect on growth
My thesis for investing in Alcatel-Lucent
That thesis was in no way undermined by Alcatel's earnings report released earlier this week that sent its shares tumbling 18%. Its LTE business was three times what it was last year, and though the company got walloped on its China business, where GSM dropped 90%, that had more to do with the government's move to push bids out for another quarter. Alcatel is fully expecting that to rebound in the second quarter and that the 300-basis-point drop in gross margins, a large part of which was tied to China, will recover as well throughout the year. The LTE business does carry lower margins than it recognized from CDMA and GSM, but they're actually better than expected, so although the economy in Europe and the U.S. does weigh on forecasts, the drubbing it took after earnings on Thursday (and continued punishment on Friday, when it closed down another 2.5%) seems unwarranted.
I'll admit the North American market was weaker than I expected. Ericsson
CAPS member dividendsrus seems a little dismissive of its prospects, seeing some "salvage value" left in the stock, but its licensing deal, where it will offer access to its patent portfolio to companies through a syndicate, could generate as much as 1 billion euros for the company. Add Alcatel to your Watchlist, and then tell us on the Alcatel Lucent CAPS page whether it will recover as the year progresses or whether will investors hang up on the stock altogether.
Content at a price
Falling margins were also to blame for Akamai's
And Akamai did, seeing revenues jump 16% and profits coming in ahead of analyst expectations, but they were only flat with the year-ago period. But by bolstering its acceleration technology segment with acquisitions and adding top rival Cotendo to its portfolio, it solidifies its industry-leading position.
Yet that doesn't mean it can't feel the pressure, and with telecoms like Verizon
With 96% of the more than 3,200 CAPS members rating the content-delivery specialist to outperform the market, it's clear they believe the company won't be marginalized. But tell me in the comments section below or on the Akamai CAPS page whether you think it can still speedily recover, and then add the stock to the Fool's free portfolio tracker to watch the competing CDNs vie for share.
Ready for a resurrection
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Fool contributor Rich Duprey owns shares of Alcatel-Lucent, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of L-3 Communications Holdings. Motley Fool newsletter services have recommended buying shares of L-3 Communications Holdings. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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