Shares of Alcatel Lucent (NYSE: ALU) jumped as much as 22% on Friday, powered by newfound hope of a financial future.
The maker of telecom networking equipment is talking to Goldman Sachs (NYSE:GS) about a life-saving cash infusion, according to Bloomberg's anonymous sources. It's unclear exactly how large the loan would be, but Bloomberg reports that it would be secured by some of Alcatel's substantial assets.
Alcatel's balance sheet is in dire need of support, and a Goldman loan could buy the company some time to get back on its feet. The market for long-range networking equipment, where Alcatel specializes, has been in the doldrums over the last couple of years. Major telecoms Verizon (NYSE: VZ) and AT&T (NYSE:T) just haven't been building out their networks as quickly as their suppliers had hoped, in efforts to conserve cash until the global economy improves. Some networks are taking their cost-cutting plans even further, as evidenced by France Telecom (NYSE:ORAN) slashing dividend payments and Telefonica (NYSE: TEF) hitting "pause" on payouts altogether.
In this kind of environment, it's kind of hard to pitch network upgrades to the networking giants. The hard times can't last forever, but Alcatel might not make it to the other side of this storm without some immediate financial support.
I like the fiscal conservation moves Alcatel itself has been doing lately, and this stock could become a monster turnaround story if all the puzzle pieces fall into place. Goldman's helping hand would be a welcome first step. Just don't forget that Alcatel remains a risky stock even with a fresh wad of borrowed cash on hand. It's a speculative holding at best, and hardly a back-up-the-truck gimme.