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A Few Reasons Why Alcatel-Lucent Is Still a Long-Term Opportunity

August 07, 2014 | About:
jaggom

jaggom

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French networking equipment maker Alcatel-Lucent (ALU) released results for the second quarter which were better compared to its past performances. But the results were not as impressive as analysts and investors were anticipating. Despite narrowing its loss, the company’s shares fell. However, Alcatel is making efforts to keep its performance strong through a number of initiatives.

Working on a turnaround

Moving to financials, the French networking equipment maker showed some impressive operational results, which led the company to narrow its loss. The company’s top line improved 0.7% on a year-over-year basis, clocking Euro 3,279 million. The gross margin of the company also improved 140 basis points, which is believed to have come from its cost-saving efforts.

Alcatel excels as a networking equipment maker. The company holds a solid position in the market. The company was struggling in the past, which can be tracked by a declining performance. However, it now seems that the company’s turnaround efforts have worked out well for it. This can be seen in its results. For the fourth consecutive quarter, the company managed to narrow its loss.

Alcatel is optimistic about better growth in the future on the back of some key points. With the LTE rollout, Alcatel is also seeing growth in its business in markets such as North America and China. With such growth opportunities, Alcatel's wireless access business will get better.

The way forward

Alcatel is mainly focused on improving its customer base. To achieve this, Alcatel is making some impressive moves. One of its customer wins was with AT&T. LTE and small cells are one of the main areas where Alcatel is focusing. Recently, Alcatel has been selected by Vodafone in small cells which, and added several LTE wins.

Besides its core service provider space, Alcatel is focusing on various aspects to improve its profitability. It is aiming at expanding its footprint to the oil and gas market to increase visibility and is expecting better revenue.

Moreover, Alcatel has aggressive plans to improve the capital base of its subsidiary, Alcatel-Lucent Submarine Networks. Under this, Alcatel is bringing out an initial public offering and has plans to invest the gains from this IPO in expanding its business in the oil and gas market. This move by the company is being met with a lot of expectations.

Product growth

Alcatel is seeing good opportunities in its IP core network market. According to the latest reports, Turkey’s leading communication and convergence technology company, Turk Telekom, has announced the deployment of Alcatel’s routing platform to fulfill the rising demands of data and video to 13.5 million access lines and 7.4 million ultra-broadband subscribers. Besides this, with the growing LTE platform, its partnership with Qualcomm is yielding results, which can be noted by the increase in the small cells deployments in the first half of the fiscal year.

Alcatel’s efforts for a turnaround are impressive, and it seems that the company will deliver impressive results in the days to come. Considering the impressive moves that Alcatel is making in its business with different smart strategies under the belt, it is expected that the company will overcome its weakness. Also, it forward P/E of 15.32 is cheap.

Conclusion

Having successfully completed the first half of its shift plan, Alcatel is well positioned to deliver in the second phase, consisting of three stages such as Innovation, Transformation, and Growth. These stages look concrete, as the company is  focusing on improving the financials. So Alcatel’s long-term prospects are stronger than before, and investors can consider investing in it for the long run.


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