"Yes, they will be cash positive with more asset sales. But isn't this what they did last year? Sold Genesis for $1.5 billion. Since then, they have burned through $1.1 billion of that cash. By the time they have to make debt payments in July, it is unlikely any of it will be left. It will have all been used up in operations. So they will need to sell even more assets. This is why the stock is $1.01 and analysts hate it."
I was just thinking about that; did the sale of Genesis just stave off the inevitable? Hate to think of ALU in those terms, but you can sell only so much, there is a finite number of assets. Cost-cutting program, although good in concept, does seem to have been implemented just a little bit too late. Had they started its implementation a couple of years ago, each one of these relatively small contracts we see trickling in, would have a very positive influence on the PPS. I guess, at this point, all we can do is just wait; see how it turns out.
By the way, Cisco to buy Meraki, a cloud networking provider, for $1.2 B.
I remember Ben and Paul saying that, in order to pare Alcatel-Lucent down to a lean, hungry company, they needed to spin off non-core businesses. And touche! The Genesis kill yielded 1.5 billion smackers. Everybody was happy. The Street, the Banks, Investors. Oh yes! But now Genesis is gone, and the scavenger birds pull what's left from the boney carcass.
What was Ben and Paul's plan for the money? It wasn't to turn Alcatel-Lucent into a techno tiger, as they led us to believe. Oh no! They needed the dough to fund operations and make payroll.
We're all greedy, selfish, voracious animals. And the animals who wear pinstripes suits, Armani shoes, silky ties, and diamond nose studs want but one thing: another asset kill. They want the feel of warm blood trickling down their throats. They want to fill their bellies with finger licking flesh. And after dinner they want to lie long on the grassy knolls of Wall Street, digest the food, snooze a lil, and then have a good #$%$.
I can see the bank CEO's have trouble keeping a straight face as Ben and Paul roar about the money to be made from their core routers and light radio. And I can hear the bank CFO's laughing and coughing hysterically as Ben and Paul snarl that Alcatel-Lucent is gonna take market food away from the big cats in the techno jungle, Cisco and Juniper.
Too late and too little as well are the problems here. If Ben had the foresight of the people at NSN, and began the process of more serious cuts - 17,000 - and a year ago, ALU's expenses would be much lower, and the company would be profitable now, just like NSN. They could have used the proceeds from the Genesis sale to cover the restructuring costs from the layoffs, so they would be able to sock some money away, and sell off unneeded assets to generate additional funds to pay down debt. But ALU does not have smart leadership like NSN, So, the Genesis sale simply went to cover another year of Ben's cash burn, leaving nothing to pay down debt.
So now we begin a process of cutting personnel, but ALU needs cash to cover restructuring plus a large debt payment in July. And it is still bleeding cash from operations. Hopefully Q4, traditionally very strong, will temporarily stop the bleeding, but it will start up once again in Q1 and Q2, leading up to the debt repayment. ALU has some very nice products. Basil Alwan is an outstanding performer. But Ben and his Paris contingent have grossly mismanaged this company from a financial standpoint. If you look at most analysts' estimates, they do not believe ALU can recover, at least not as it is now structured. So what needs to be done is have the company sold to a Samsung, Cisco, or anyone with the ability to control costs and operate at a profit. Ben has no idea how to do this, but people like John Chambers do. Just look at their records. How much better off would we be if we received Cisco stock in exchange for our ALU stock, that is a Cisco that has been revitalized with the best products that ALU's engineers have created? The answer is obvious to everyone but our Board of Directors.