Alcatel-Lucent (ALU): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report


Alcatel-Lucent is a leading networking and communications technology company. We are reiterating our Neutral recommendation on Alcatel-Lucent with a target price of $3.25. Alcatel-Lucent finally reported a break even after severe losses. The company is benefiting from its ongoing repositioning as per The Shift Plan,' which was formulated in 2013 to transform itself from a telecom generalist to a specialist in IP networking and Ultra-Broadband services. Till date, consolidated fixed cost savings under the plan currently stands at 645 million ($818.18 million), which marks two-third of the targeted cost saving level. However, the highly competitive nature of the telecom industry and the changing regulations and standards also remain matters of concern.


Based in Paris, Alcatel-Lucent (ALU) 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 Jun 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. However, the company has already seen improvement in its cash and balance sheet position in the past few quarters. Moreover, its share prices have surged by more than 180% in the last two years, reflecting the success of this strategy.

The company operates its business in three primary segments:Core Networking, Access and Others

Core Networking Segment (42% of revenues for fiscal 2013 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 (50.4%) 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.

Other Segment (5.9%) The segment has two divisions, Enterprise and Government businesses.Through its Enterprise business, Alcatel-Lucent supplies end to end products, solutions and services for small, medium, large and extra-large companies to improve communication across employees, customers and partners. The company's government business, LGS Innovations LLC provided networking solutions to the U.S. Federal Government. In the reported quarter, the company also closed the previously announced divesture of its LGS Innovations business to Madison Dearborn Partners for approximately $200 million in cash.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Stocks

Referenced Stocks: ALU , IP

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