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Alcatel-Lucent Message Board

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  • buddhazenpeace buddhazenpeace Oct 16, 2012 1:47 PM Flag

    The Choice ALU Has

    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 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
    The pension is based on a when discount rate goes up...the debt will dissappear

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    • 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.

      • 2 Replies to wb46
      • Exactly. While things like food, land and gas tend to go up in price over time, technology tends to go down in price. An LCD TV ten years ago cost something like $5,000. Today you can get a better one for $500.

      • nedwelch Oct 16, 2012 3:15 PM Flag

        alu has to a better job of showing the end use how they can save and make money with there equipment and software package .. looks like eric still does a better job with the same workforce ... never researched it but was lucent only contract before he break up for att .. did they compete overseas or was there stuff given away by att to set up phone systems .. remember the att gold phone for cuba in the godfather

        Sentiment: Strong Buy

    • 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.

      • 2 Replies to aaastefano
      • Stefano,

        You are making some good points; but, let me deal with those one-by-one:

        1. Recapitalization of debt is just a reduction in current debt payment or its deferment; but not in its reduction. Since the financier is going to make sure that he makes money and also seeks guarantee of return of his money, the actual debt gets fattened; meaning the liability is increased. Yes, the quarterly and annual bottom line numbers look better; but, institutional analysts and investors account for the real liability and do not get fooled by artificially raised bottom-line numbers. In my view, instituional investors understand that game and won't be lured by such gimmicks. Also, I don't htink that can be done for pension payment except other debt. Besides, ALU doesn't need that because it generates enough free cash through revenue ($6B in hand now) and the other debt is much less than that. Of course, a recapitalization scheme is preferred by top executives of the company who do not want to put their jobs in the hands of the acquirer or merger partner's bosses!

        2. Financing purchases certainly helps increase sales volume; but not necessarily increase the long-term bottom line because too otften these credits have to be written off! Just like we had to write off billions in such deals we had with Egypt and Pakistan! These international beggars are always looking for such avenues, only to rob you! Since ALU has a global business, this is risky way to increase business. Yes, it can do so for doing business in the U.S.A. for outfits that are not likely to seek bankruptcy. Chinese companies do that through their govt which wants to buy political favor in return for forgiving such loans! For U.S. or Western European companies to do that is pretty risky. (Ask Citi Bank and RBC which extended such loans to crooked global clients!)

        3. Regarding competition wanting ALU disintegrated into pieces is not liklely in this case because the competition is chiefly Huawei, ZTE, Samsung,Cisco and Ericscson to name a few - all in differnt countries. Yes, it would be possible if all were U.S. companies or ALU was privately held!

        4. Shrinking the company through spinoffs is possible and perhaps may be a preferred route. But, I am not sure if that's simple for this company to do and if Verwaayen and company are looking to do so.

        Thanks for your response.

      • Don't forget that ALU has a core router that's taking market share from Cisco! Plus look at all the awards that ALU received just recently! Remember, a few years back Ford stock went to a dollar per share and look where they are now!

        Sentiment: Strong Buy