We are upgrading our recommendation on Alcatel-Lucent to Outperform
from Neutral, due to robust fourth-quarter 2014 results. The
company reported a positive earnings surprise of 150% benefiting
from its ongoing repositioning through The Shift Plan' that was
formulated in 2013. It is now shifting focus from older
technologies (2G and 3G wireless equipment) to high-potential newer
ones like Internet routing. Also, management intends to trim
approximately 15% of costs by 2015. As of Feb 6, 2015, the total
cost savings represent over 70% of the targeted savings through The
Shift Plan. Moreover, the company saw strong IP Routing revenues,
thanks to new deals and new product introductions. Going forward,
Alcatel-Lucent aims on leveraging innovation to drive growth and
generate positive free cash flow from this year.
Based in Paris, Alcatel-Lucent is a leading global provider of
IP and Cloud networking, ultra broadband fixed and mobile access.
The company started its restructuring strategy The Shift Plan', an
initiative taken by the CEO Michel Combes in 2013.
The Shift Plan' is a company strategy intended to reposition and
establish itself as the specialist of Internet Protocol (IP) and
Cloud networking, ultra broadband fixed and mobile access. The
three-year long plan is scheduled to be completed by 2015. Notably,
the company has already seen improvement in its cash and balance
sheet position in the past few quarters.
The company operates its business in two primary segments: Core
Networking and Access.
Core Networking Segment (45% of revenues for 2014 came from this
segment) Alcatel-Lucent is a world-wide leader in in the IP
(Internet Protocol) market. The three main businesses of the
Networks Group are IP Routing, IP Transport and IP Platforms.
Together they provide end-to-end communications networks and
individual network elements. The company's IP product portfolio of
routers and switches support IP-based applications and services,
which in turn monetize network investments of service providers and
lessen customer agitation. The company provides state-of-the-art
network infrastructure including trending services like emerging
Software Defined Networking (SDN). IP Transport division of the
segment specializes in providing infrastructures and services for
enabling reliable and efficient optical transmission while cutting
down the costs significantly. The company's IP Platform business
has been designed to bring together the service providers and
customers, in order to enhance the user experience while maximising
the benefits from the data-driven technology.
Access Segment (55%) Under this segment the company provides
services through four business divisions namely, Wireless, Fixed
Access, Licensing and Managed Services. The company is a leading
service provider, for both wireless communications infrastructure
and fixed broadband access, addressing the rising demand for
broadband services across the globe. Apart from these services, the
segment also holds licenses for various wireless, optical and data
networking technologies. Further, the segment provides
cost-effective managed services solutions for diverse industries to
enhance their networks.
Alcatel-Lucent (ALU): Read the Full Research
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