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Alcatel-Lucent Message Board

  • mruyog mruyog Oct 16, 2012 11:03 AM Flag

    The Choice ALU Has

    The fact with this company, compared to its comtetition, is that it has a huge pension liability and debt. To service both takes a substantial bite from its profit. This situation while looking at fierce competition from Huawei, ZTE and Cisco is a serious drawback for ALU for expanding its business in a global market against these global players. The greatest advantage the company has is its brand name, its patent portfolio and R&D capability. These are certainly very significant advantages. But, looking at competition among clients (like AT&T, Verizon,and Sprint in the U.S.A.) and cheapest products demanded by huge developing countries, ALU is in a fix to compete pricewise. Thus, its leading-edge technology alone doesn't help in bringing up its share price or to impress investors who look only at the bottom line. Thus, and if Verwaayen and ALU board are smart enough, they must look for a merger with an outfit like Cisco which is awash with cash. Otherwise to fight against State-supported Chinese companies in the global market will be very hard. Light Radio and such other products can not alone win jobs for this company if the price is too high compared to relatively much cheaper similar products from the competition. Selling patents and reducing the debt can help; but, the buyers will be the very competition which will force ALU to sell those underprice which ALU wouldn't want! Thus, in my view, looking for a merger with a company like Cisco would be the best choice. And, I hope, that is what somethinhg the management is working on.

    Sentiment: Strong Buy

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    • expand with details on what the pension liability issues are numerically please. facts are necessary.

      Sentiment: Strong Buy

    • i don't think cisco could or would buy this. Anti trust concerns in the router market would kill that segment of it. Personally if theres to be a surprise buyout think it would come from a google or samsung. Someone who would want in this entire business and who could slash even more costs. But who has none of the competitive issues that a cisco would face.

      i think samsung could get this deal done. They could be one who could retain the U.S business without any major concerns and clearly they WANT in this business. another big reason to keep an eye on them as being an acquirer.

      Aside from that..i think ALU will go it alone. and can go it alone. Their debt issues are manageable. and i dont' see the chinese as any more threat than normal. In FACT...ZTE might be self imploding in a way. Their whole low margin strategy might be the cause of their big losses. I think ALU can operate best in the mid range market. Between an eric and the chinese. they offer a lot of value and things besides just price. Price doesn't always win business. Why do people buy expensive iphones? Quality and brand and reputation is very important to apple and their customers.

      you and i can go into walmart and buy the 9.99 toaster too. Do we all do that? No. we buy other brands at higher prices as well because of the quality and reputation.

      ZTE and huawei might find themselves drowing in cheap junk contracts that keep them SO busy and earn them nothing.

      when it comes to hetnets who has the experience? That is much more about that as well as just making and selling cubes.

      Lets face it. We will never have all the business. But we'll have our share and more i think.
      We have a variety of products to draw from..and a great position all around in each of them.

      I think what is going to make ALU work is all of the above. All the pieces that come together to create a great company again. From core routers to carrier cloud to fiber to lightradio to vdsl to everything else. An 8 cylinder car running on all 8. Smoothly and efficiently.

      That is the new ALU I see.

      ~TS
      jmho

      Sentiment: Strong Buy

    • Alcatel Lucent lost 1.5 pennies from operations last qtr.....thats a miniscule amount...
      The Idea that prices for telco equipment will continue to go down is stupid...
      Thats like saying...well I bought my 1st new car for $2000 so later on on it will cost $500
      same car today cost $40,000....same with my house,,,Prices go up not down....
      Prices may temporaraly go down,,,,but thats very short term.
      The cost cuts.....will give Alu big profits in the long run.....as it makes cost
      cuts part of the ALU culture...
      ALU is very well situated cause they have lined up a lot of big customers across the
      planet.....
      The pension is based on a formula...so when discount rate goes up...the debt will dissappear

      • 2 Replies to buddhazenpeace
      • I don't think I can agree with you on the price of telco equipment not going down. Tech is not like automobiles. The computer I can get today for a few hundred dollars is far more powerful than the one I bought a decade ago for a couple thousand. I remember the first calculator I saw in the early 1970s. Plug in, did only basic math functions (add, subtract, multiply, divide), and cost $300. $300 then is a couple of thousand today. They give these things away now with far greater functions. My father bought one of the earliest digital watches. Cost a lot. Now they are $5 at Wal Mart. Being a high cost provider in tech is not an easy place to be.

      • u're all right but the problem is that in order to win contracts nowadays vs. the Chinese is not only a question of low prices but financing and Alcatel can not finance its customers to purchase their products.

        The US got right when they warned US carriers not to use Chinese manufacturers as this is the how they get business...the problem is that India also warned against the Chinese manufacturers but at the end they buy from Chinese anyway as they get the financing.

        Alcatel don't need to be bought out but simply recapitalized through a monster debt issue (cost of debt is lower that cost of equity) or a loan covering their contracts.

        If they are able to do this they would be able to win any contract at conditions which are not prohibitive but need to have a serious management in place that tackle the margin side of the equation like a surgeon.

        This is what eventually France (and the US) will do, as I doubt that it will pass the antitrust even if the aquirer was Cisco. All the players would rather see Alcatel going bust in order to take pieces here and there and see another competitor exiting the market.

        I'm quite sure that Alcatel is working on a debt issue currently and if they are able to secure that you could expect its price to quadruple in a matter of days.

    • Pension debt is based on formulas not based on actual payments due.....the 2 billion debt can be erased quickly when the discount rate goes up....thats why no one mentions pension debt

    • Pension debt is based on formulas not based on actual payments due.....the 2 billion debt can be erased quickly when the discount rate goes up....thats why no one mentions pension debt

    • I think you have hit the issues on the head, and explained why the stock price is at such a terrible level. They have very good products, but cannot match the competition on price in a field where buyers are more concerned about price than anything else. So in order to make sales, they have to cut prices to the point where margins disappear. And while they slowly try to reduce their costs, the market drives pricing power down at least as fast. Meanwhile, they don't have the cash to do things that others can - like offering better terms as the Chinese do. So, the solution is as you have described.

      ALU should go to Samsung and tell them they are making an offer to sell the company to Cisco. Samsung wants to expand their reach in this business and must be salivating at the prospects afforded by the Chinese being locked out of the U.S. market. Only 3 stodgy old European companies to compete against. They know what they did to what was once a much stronger European competitor - Nokia - in the cell phone market. But, if Cisco, with its money, reach, and tight fiscal control, becomes the competition, it will not be so easy for Samsung. Then, they go to Cisco and say this is your last chance to expand your reach into telco infrastructure, because good luck if you have to compete against Samsung. And by the way, if you are losing share to ALU's IP division, how will you feel when that becomes Samsung's IP division. Finally, they go to Apple, Microsoft, Carlos Slim, everyone else who there might be some chance they have an interest in the field and let them know this is their last chance to compete against a weak field. Whoever makes ALU the best offer wins. My estimate is we get $3-$6.

    • Ha. Alu smells like a wet dog. Cisco is not stupid!

 
ALU
3.85+0.15(+4.05%)Apr 17 4:02 PMEDT

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