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
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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