Telecommunications equipment company Alcatel-Lucent (ALU, Financial) is making impressive moves to make a comeback. Alcatel-Lucent is experiencing better profitability in most of its business segment due to its ongoing repositioning based on its Shift Plan. The company has done away with two-thirds of its shift plan and is progressing well with its plan to accomplish it completely. Its shift plan is aimed at delivering fixed cost savings of $1.27 billion and another $1.27 from the sales of its assets over 2013-2015. Moreover, its shift plan is assisting the company to effectively focus on IP networking and Ultra-Broadband services that could enhance its performance in the fourth-quarter.
Strong progress
Alcatel-Lucent is progressing well to generate revenue of approximately $8.77 billion in its core networking by 2015. It is consistently investing in the high-potential newer technology such as internet routers. Its internet routers are gaining tremendous traction in regions such as Europe, Asia outside China and CALA. This is also helping the company to offset the softness in the markets such as China and North America.
Additionally, the company should also benefit from the continued efforts of rationalizing its Motive portfolio. The recent growth in service and device managements is leading to deployment of Small Cell 4G devices, VoLTE and Voice over Wi-Fi. This is driving its Motive portfolio growth.
Moreover, the company continues to realize high growth in its IP platform. Alcatel-Lucent has during the third quarter won four new contracts –Â one in the United States with Century Link and the remaining three in China. It has acquired approximately 32 new contracts this year so far. Looking ahead, the company sees remarkable growth prospects associated with its IP platform in 2015. Its 1830 platform continues to impress new and existing customers.
It represents approximately 50% of the total product revenue for the company. The company is also deploying its 100G technology in Europe in order to meet growing demand of networking capacity. Also, the company plans to roll out many new innovative products this quarter that should certainly enhance its performance in the current as well as into 2015.
Moving into growth markets
In addition, Alcatel-Lucent continues to advance its growth prospects in Cloud and virtualization. It keeps acquiring many new customers under this platform. Nuage has managed to bring three additional customers during the third quarter for its innovative SDN services. It has a total of 12 customers who are effectively deploying its SDN services, and it has done away with approximately 50 trials with the venture.
Moreover, its ultra-broadband access continues to make significant progress. Alcatel-Lucent saw its ultra-broadband access registering five new wins for its LTE overlay. This includes Globe Telecom, which is expected to deploy its LTE-FDD and LTE-TDD technologies in Philippines and in Asia, outside China.
Furthermore, the company is seeing solid growth prospects with the vectoring and fiber under its fixed networks rollouts. Also, the company has recently unveiled new VDSL2 vectoring. It has won two awards at the Broadband World Forum, held recently. This includes its highly innovative G fast Vectoring for its best fixed broadband and the other for its world-class service provider for VDSL2 vectoring.
Conclusion
Alcatel-Lucent looks a good pick. The company is progressing well with its "Shift Plan" that will certainly yield high returns in the future. Moreover, it’s rolling out various new and innovative products that continue to win new customers for the company. The analysts have estimated CAGR of 45.10%, which is more than double the average industry CAGR of 15.17% for the next five years. This indicates solid long-term growth prospects for the stock. The stock also offer remarkable short-term gain as the analysts see CAGR of 94.40% this year and 833.30% for next year respectively. The company is trading at the forward P/E multiple of 14.41. Its balance sheet carries total cash of $6.07 billion, which is enough to cover its entire debt of $6.29 billion.
