Any Hope for Alcatel-Lucent?

Senior tech analyst Eric Bleeker and chief technology officer Jeremy Phillips discuss the future prospects for Alcatel-Lucent, a popular Fool.com stock. After the company’s press release began with cost reductions, investors could have guessed that there would be trouble ahead. While Alcatel-Lucent brags about leadership in many next-generation segments, price wars and intense competition will hurt this growth area. This isn’t the only problem for Alcatel-Lucent, as its traditional areas are on the decline. Wireless, its largest network segment, is seeing the biggest year-over-year declines. The company might brag about leadership in next-gen technologies like IP, but if that’s being overridden by drops in traditional areas of sales, that’s a net loss they can’t easily recoup. Their “adjusted” operating loss might have only been 31 million euro, but losses continued to widen.

At the end of this quarter, net cash was only 236 million euros, while the quarter before it was 753 million. This rapid deterioration does not look good for investors.

One key trend is that a “hot” investment sector will often let investors down, especially if there’s tons of competition. Even near $1 where the company is priced to go under, I’d avoid Alcatel in favor of better investments.

In fact, this side of F5 Networks, it’s hard to find any companies really seeing huge growth in telecom equipment. Cienna’s been one of the stronger names, but they have balance sheet woes worse than Alcatel-Lucent. Investors would be better off looking at other sectors. sfr

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