Today, let's look at three things investors should be watching regarding Alcatel-Lucent, as they will provide us better insight into the company.
1. Verizon Wireless' spending
Verizon Wireless, the partnership between Verizon
It's therefore imperative that shareholders keep a close eye on Verizon Wireless and its spending habits. Smartphone and tablet sales have exploded higher, so we can only assume the demand for the infrastructure to support all of that data is going to head higher as well. Surprisingly, over the past three quarters, capital spending hasn't been strong and Alcatel-Lucent actually lowered its recent quarterly forecast on demand weakness (among other things). However, long-term demand for 4G LTE solutions should remain strong.
2. Europe's debt crisis
With nearly one-third of Alcatel-Lucent's revenue being derived from Europe, keeping abreast of the economic outlook in that region is a must for shareholders.
Alcatel-Lucent has probably suffered worse in Europe than any region geographically, succumbing to reduced spending budgets by the region's largest service providers and due to lower-cost competition from vendors like Huawei Technology. Alcatel-Lucent has responded by cutting costs and jobs when and where it can, but that may not be enough to thwart the potential for falling demand.
3. Alcatel-Lucent's cash position
Perhaps the biggest uncertainty that looms large over Alcatel-Lucent is whether the company can stay solvent after logging a free cash outflow in seven of the past eight years. Some of that relates to the company's large capital investments, but a good chunk derives from operational losses. Currently, Alcatel-Lucent has $6.4 billion in cash, or about $880 million in net cash.
In order to maintain that cash position as the company continues to pile on quarterly losses, Alcatel-Lucent is either going to need to step up its cost-cutting programs (including layoffs), or it may need to consider selling some of its 28,000 patents. Let's keep in mind that recent 2G, 3G, and 4G wireless patent sales netted anywhere from $220,000 to $750,000 per patent. Even if Alcatel-Lucent's patents aren't as valuable as those recently sold, there's definitely good value to be had in its portfolio of 28,000 patents.
Now that you know what to watch for, it should be easier to analyze Alcatel-Lucent's successes and pitfalls in the future and hopefully give you a competitive investing edge.
If you're craving even more info on Alcatel-Lucent, I would recommend adding the stock to your free and personalized watchlist so you can keep up on all of the latest news with the company.
Alcatel-Lucent may not be having the best of luck capitalizing on the trillion-dollar revolution in mobile, but a company recently highlighted by our team at Stock Advisor definitely is. Find out the identity of this game-changing company, for free, by clicking here to get your copy of this special report.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on Motley Fool CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
The Motley Fool owns shares of France Telecom. Motley Fool newsletter services have recommended buying shares of Vodafone Group and France Telecom. 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.