On Jun 6, 2014, we issued an updated research report on
). The company has been receiving a number of new contracts, driven
by growth in IP and 4G LTE (Long-Term Evolution) technology. In
addition, the company's Shift Plan is in place and achieving the
The company had reported first-quarter 2014 results with
adjusted net loss from continuing operations of 4 cents per
American Depositary Share (ADS), narrower than the loss of 19 cents
per ADS in the prior-year quarter. The loss was also narrower than
the Zacks Consensus Estimate of 8 cents. In accordance with the
Shift Plan, by the end of the quarter, the company had achieved
fixed cost savings of about €143 million ($196.0 million).
This Zacks Rank #3 (Hold) company is perfectly positioned to
gain from the structurally growing optics and IP markets. The
company's IP Routing and IP Transport businesses remained strong in
the quarter. Also, the continuing growth of IP Platform's IMS voice
over LTE (VoLTE), Subscriber Data Management (SDM) divisions
benefited the company.
Alcatel Lucent also remains a beneficiary of the significant
growth of wireless technologies and smartphones in the emerging
markets. The next-generation super-fast LTE and cloud technology
has significantly boosted Alcatel Lucent's
However, on the downside, Alcatel Lucent's future growth is
dependent upon the continuous deployment of its mobile data and
all-IP network transformation technologies. If the emerging markets
fail to maintain the current deployment rate of high-speed 3G,
next-generation 4G or any hybrid 3G-4G wireless networks, the
demand for smartphones will decline, which will negatively affect
Alcatel Lucent's financials.
Also, the company faces intense competition from companies like
Cisco Systems Inc.
), Fujitsu, Huawei, ZTE and
). Furthermore, in recent years, consolidation has reduced the
number of networking equipment vendors, resulting in a smaller but
stronger set of competitors.
The company's financial position has also being impacted by the
ongoing restructuring activities. In the reported quarter, the
revenues from Alcatel's Managed Services division were €99 million
($135.7 million), reflecting a 50.5% year-over-year decline at a
constant exchange rate, owing to restructuring efforts in this
business to cut down the losses. Moreover, the company's cash is
being affected as the complete benefits from the restructuring
initiative will only be experienced in the long run.
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