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

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Summary:
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.


Overview:

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.


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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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As of 5/29/2015, 04:15 PM


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