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Alcatel-Lucent Message Board

  • rumors_twilight rumors_twilight Feb 10, 2013 3:56 PM Flag

    Another sobering/chilling article on ALU's prospects

    It is too long to post here, but the title of the article is:

    Alcatel fights for slice of a shrinking pie

    It seems to take a pretty objective view of where things stand right now for the company.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • mpeppy....no reply button at your post.

      Selling off unprofitable units would certainly help. Reportedly, they are considering such action.

      Carefully trimming headcount in profitable units, to squeeze out more productivity, is also a good idea.

    • From a different part of the thread:

      rumors wrote: "... They did not delve into the post 2013 restructuring much, but he did a pretty decent job describing the various pitfalls along the way. I don't know, I think the article gave a pretty decent description of the macro view of what the company is going to face over the next year. Too many competitors, low cost competition, the leadership issue, sales in a bad economy, reliance upon the US, and a few other things, some good, were covered. They did not delve into the post 2013 restructuring much, but he did a pretty decent job describing the various pitfalls along the way. ..."

      IMO, this article did not delve into anything. It's little more than "throwing enough (c)(r)(a)(p) on the wall in hope some sticks." The article insinuates that ALU can't accomplish the restructuring goals as proposed in the lender presentation but does provide any specifics. The author starts with a superfical negative quote of Bernstein saying that the management change "... may presage further difficulties ..." without providing any support, then throws in a few positive remarks in the middle to appear unbiased, and ends of course with Nortel ... garbage, IMO ...

      BTW, the author is utterly wrong in his statement that "There are too many large groups fighting for a slice of a shrinking pie". The addressable market size of ALU is increasing, the pie is not shrinking, but competition is obviously increasing as well.

      I could rebuttal every paragraph, but it would take me 5 pages, so I won't.

    • Alcatel-Lucent has been one of the more ill-fated mergers from the pre-credit crunch era, with the four-and-a-half-year attempt to return the Franco-American tie-up to profitability finally proving too much for chief executive Ben Verwaayen last week.

      Shares in the group initially bounced higher on confirmation of the end of his tenure, which failed to meet his basic objective of returning the group to “normal”.

      However, shares fell again on the realisation that there would not be a short-term fix. Mr Verwaayen departure’s had been well rumoured, not least after a striking mea culpa last year when he told the Financial Times that blame lay with the management.

      Analysts have expressed concern that finding a replacement will be only the first of the considerable challenges for the company. Pierre Ferragu, analyst at Bernstein, said: “The change of management does not address Alcatel’s structural problems. On the contrary, we are concerned that it may presage further difficulties for the company.”

      Mr Verwaayen implemented a restructuring programme to cut 5,000 jobs and €1.25bn from costs, but analysts predicted that this would need to be the beginning, not the end, of the overhaul.

      “The golden question I am always asked is: can technology companies survive at all in Europe?” said Mr Verwaayen in an FT interview last week. “My answer is – yes, as long as you adapt.”

      While some analysts still whisper the bogeyman’s name – Nortel, the Canadian telecoms group that went bust in 2009 – the risk of bankruptcy at Alcatel has receded given €2bn of financing secured earlier this year against the company’s portfolio of 29,000 patents.

      It still faces long-term challenges in a market where consistent price erosion has been caused by economic and technological change as well as intense competition from cheaper Asian rivals. These threats were largely non-existent when France’s Alcatel and Lucent in the US merged in 2006.

      There are too many large groups fighting for a slice of a shrinking pie that has changed its flavour since Alcatel and Lucent merged, according to one sector executive. He predicted that there would need to be consolidation to reduce five groups – Nokia Siemens Networks (NSN), Alcatel, Ericsson, Huawei and ZTE – into three sustainable businesses.

      However, such moves will not be easy, according to bankers in the sector, and those close to the company play down recurring rumours of a tie-up with NSN. Alcatel itself is an example of why a merger is not always a solution, given its struggles to reduce costs sufficiently since the $11bn deal.

      Analysts at Berenberg estimate that revenue per employee metrics do not look attractive at $280,000 per employee, against NSN at $320,000 and Ericsson at $330,000.

      Rivals are not in rude health, even if they appear further along than Alcatel in changing their business models to cope better with market conditions. NSN in particular cut 17,000 jobs to orchestrate its recent return to profit.

      It is not all bad news, though. Alcatel’s key market in the US – where it is the main supplier to AT&T and Verizon – looks safer than its precarious European situation given Washington’s suspicions over using equipment from Huawei, Alcatel’s Chinese rival. US carriers such as AT&T are spending more on equipment and network upgrades, a counterpoint to the depression among larger customers in Europe looking to squeeze budgets.

      China is also a key factor for 2013 given the likelihood that China Mobile in particular will invest significantly in new networks. While ZTE and Huawei are likely to benefit, there should also be contract wins for European suppliers already conducting trials in the country.

      Alcatel also has assets to sell to raise cash if necessary, most obviously its submarine cabling arm, and there could be state support. Fleur Pellerin, the French digital industry minister, said the state would be willing to step in to take a stake in Alcatel assets that it did not want to allow to fall into foreign hands.

      The group has formulated a new three-year strategy, although this would be subject to change with the incoming chief executive, those with knowledge of the company’s plans acknowledged. Speculation in Paris about Mr Verwaayen’s successor has centred on internal candidates, including Stephen Carter, the group’s European president, Philippe Kerrier, the French network chief, and Paul Tufano, finance director.

      Mr Verwaayen conceded that the company needed a “fresh pair of eyes” to examine the company’s problems and implement the strategy. He said the strategy centred on much tougher cost management, slashing the number of products and markets where the company operates and building the services business. “We can’t be everything to everybody.”

      Despite its problems, Mr Verwaayen insists that Alcatel “cannot only survive, it can thrive as well”.

      Analysts are not convinced. Mr Ferragu paints a scenario of default for Alcatel around January 2015 should there be no additional disposals, and another where the company “would still run out of cash around mid-2015” even with the sale of submarine and enterprise units.

      Similarly, in a January note, Citi asked whether Alcatel was the new Nortel given parallels in business mix, strategy and capital structures. Citi’s answer of “maybe” will not be reassuring for investors as the group seeks the new normal that Mr Verwaayen could not find.

    • Problem with Garbage..is that it goes to the Dump....Everything I read is that
      Alus products will grow in sales due to world wide demand...

    • They may be, but you are not. You simply ignore all other positive news. Bensteins never been positive about ALU. The fact is that, after 4Q earning, 3-4 analysts raise the expectation, none lower.
      For any stock there are always bulls and bears. If you only refer to one side or other, you are trying to manipulate the reader.

      Good luck with that. My take is that the reader are more intelligent than you think.

      • 2 Replies to tin_phm
      • This idiot, Rumors, is hoping for ALU to tank ever since he has started postings here. He is claiming that he his long but his action speaks differently. He always seems to exaggerate the negative and yet disingenuously downplay any positives. He is nothing but your run-of-the-mill riff-raff basher.

      • Factually, there are some positive signs at ALU, that culminated in an excellent 4Q, when you strip out the non-cash charge. So good seems like it is definitely happening.

        But also factually, the negatives still outweigh the positives.

        Don't care who buys, sells, holds or shorts. The effect on my long position will be minuscule...as those making the right decision will profit....as company progress/or the lack thereof along the way...is acknowledged by investors.

        I chuckle when I think that 4 1/2 years ago, when Ben arrived, if you had been a stockholder then, you would have been posting the same positive baloney. They had great plan back then, and then another plan after that plan failed, and another plan when that plan failed, etc. There were probably legions of posters who posted the very same positive outlook that you have....and they were wrong for 4 1/2 years. And that doesn't even take into account the Russo plans, prior to Ben's arrival.

        Ah yes...and now we hear the clarion call of yet another plan. All I can say is that when considering ALU plans, one needs to take them with a grain of salt.

        Does this plan seem different? Yes, I think it does.

        Will it work? Yes, I think it has a slight chance of succeeding.

        Will it be easy? Not a chance.

        Every single Q is going to be very closely scrutinized and analyzed to see if ALU is really gaining traction, or if 4Q12, normally a strong Q, just came in a little better than expected.

        Citi, Credit Suisse, Bernstein, and GS are not in the business of conducting bogus research on companies they cover. So, at the very least, it is advisable to consider what they are saying about ALU...and right now it is tepid.

        In 1Q13, ALU has a critical challenge....can they string 2 good Qs in a row...finally...and if they do, it will give significantly credibility to the company's plan....if not...well, we know what that means.

    • I wonder how you got that to post....the article is 5,400 + characters....and the limit I seem to run up against is about 4,000.

      • 2 Replies to rumors_twilight
      • I wonder how you got that to post....the article is 5,400 + characters

        You can remedy this by posting the article into TWO parts. Post first the part I and then the part II later after the part I is successful.

      • I think it will do a little better this year but these guys calling for $6 to $10 dollars I think are way off. I would be happy to end the year close to $2 - $2.10. That is why I sold 1/2 of my position. I do not think we will see the $1 dollar days again but feel this is a real slow roller coaster for several months.
        That is unless they sell the sub unit or land a big contract. This is the reason I left the houses portion. You just never know when something could set it off.
        GLTA

        Sentiment: Hold

    • Alcatel-Lucent has been one of the more ill-fated mergers from the pre-credit crunch era, with the four-and-a-half-year attempt to return the Franco-American tie-up to profitability finally proving too much for chief executive Ben Verwaayen last week.
      Shares in the group initially bounced higher on confirmation of the end of his tenure, which failed to meet his basic objective of returning the group to “normal”.
      However, shares fell again on the realisation that there would not be a short-term fix. Mr Verwaayen departure’s had been well rumoured, not least after a striking mea culpa last year when he told the Financial Times that blame lay with the management.
      Analysts have expressed concern that finding a replacement will be only the first of the considerable challenges for the company. Pierre Ferragu, analyst at Bernstein, said: “The change of management does not address Alcatel’s structural problems. On the contrary, we are concerned that it may presage further difficulties for the company.”
      Mr Verwaayen implemented a restructuring programme to cut 5,000 jobs and €1.25bn from costs, but analysts predicted that this would need to be the beginning, not the end, of the overhaul.
      “The golden question I am always asked is: can technology companies survive at all in Europe?” said Mr Verwaayen in an FT interview last week. “My answer is – yes, as long as you adapt.”
      While some analysts still whisper the bogeyman’s name – Nortel, the Canadian telecoms group that went bust in 2009 – the risk of bankruptcy at Alcatel has receded given €2bn of financing secured earlier this year against the company’s portfolio of 29,000 patents.
      It still faces long-term challenges in a market where consistent price erosion has been caused by economic and technological change as well as intense competition from cheaper Asian rivals. These threats were largely non-existent when France’s Alcatel and Lucent in the US merged in 2006.
      There are too many large groups fighting for a slice of a shrinking pie that has changed its flavour since Alcatel and Lucent merged, according to one sector executive. He predicted that there would need to be consolidation to reduce five groups – Nokia Siemens Networks (NSN), Alcatel, Ericsson, Huawei and ZTE – into three sustainable businesses.
      However, such moves will not be easy, according to bankers in the sector, and those close to the company play down recurring rumours of a tie-up with NSN. Alcatel itself is an example of why a merger is not always a solution, given its struggles to reduce costs sufficiently since the $11bn deal.
      Analysts at Berenberg estimate that revenue per employee metrics do not look attractive at $280,000 per employee, against NSN at $320,000 and Ericsson at $330,000.
      Rivals are not in rude health, even if they appear further along than Alcatel in changing their business models to cope better with market conditions. NSN in particular cut 17,000 jobs to orchestrate its recent return to profit.
      It is not all bad news, though. Alcatel’s key market in the US – where it is the main supplier to AT&T and Verizon – looks safer than its precarious European situation given Washington’s suspicions over using equipment from Huawei, Alcatel’s Chinese rival. US carriers such as AT&T are spending more on equipment and network upgrades, a counterpoint to the depression among larger customers in Europe looking to squeeze budgets.
      China is also a key factor for 2013 given the likelihood that China Mobile in particular will invest significantly in new networks. While ZTE and Huawei are likely to benefit, there should also be contract wins for European suppliers already conducting trials in the country.
      Alcatel also has assets to sell to raise cash if necessary, most obviously its submarine cabling arm, and there could be state support. Fleur Pellerin, the French digital industry minister, said the state would be willing to step in to take a stake in Alcatel assets that it did not want to allow to fall into foreign hands.
      The group has formulated a new three-year strategy, although this would be subject to change with the incoming chief executive, those with knowledge of the company’s plans acknowledged. Speculation in Paris about Mr Verwaayen’s successor has centred on internal candidates, including Stephen Carter, the group’s European president, Philippe Kerrier, the French network chief, and Paul Tufano, finance director.
      Mr Verwaayen conceded that the company needed a “fresh pair of eyes” to examine the company’s problems and implement the strategy. He said the strategy centred on much tougher cost management, slashing the number of products and markets where the company operates and building the services business. “We can’t be everything to everybody.”
      Despite its problems, Mr Verwaayen insists that Alcatel “cannot only survive, it can thrive as well”.
      Analysts are not convinced. Mr Ferragu paints a scenario of default for Alcatel around January 2015 should there be no additional disposals, and another where the company “would still run out of cash around mid-2015” even with the sale of submarine and enterprise units.
      Similarly, in a January note, Citi asked whether Alcatel was the new Nortel given parallels in business mix, strategy and capital structures. Citi’s answer of “maybe” will not be reassuring for investors as the group seeks the new normal that Mr Verwaayen could not find.

 
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