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American Capital Agency Corp. Message Board

  • mmichaelr mmichaelr Feb 10, 2013 2:51 PM Flag

    For Arwen__ALU

    Arwen, please be very careful with ALU. Until the company can again turn a profit it is truly speculative. The company is the result of the French Alcatel purchase of Lucent Technologies that was spun-off from AT&T. Alcatel gained enormously valuable assets with the Lucent acquisition but has proved inept at integrating those assets. There are allot of plusses going on (a valuable Bell Labs patent portfolio, a legacy equipment infrastructure with every major Telecom company in the world (those Telecoms have to buy software updates from ALU) and Bell Labs has continued to develop new technologically advanced products (they have a new high speed router (7950 XRS core network router) that leaves Cisco’s in the dust). FTE has penned a deal to buy. The problem has been convincing legacy customers and new ones (China and South East Asian) to invest in technology with a company that could of gone into bankruptcy. Everyone knows those Bell Labs patent rights will not disappear. Someone will purchase them. But how do you get companies to sign a contract with ALU when the future software upgrades (Bell Labs) may be owned by someone else. Historically 70% of AT&T (became Lucent) revenue generation from those Bell Labs developed products came from new ‘feature’ software. That is the software upgrade I am talking about. Call waiting, call forwarding, 911 cell call locating are examples of features. Once a customer desires these features (note some are government mandated (911 functionality)); the customer now needs training and documentation support. That comes from Lucent’s Customer Training and Information Development. All that training and documentation materials has to be translated into multiple languages. Lucent has the largest corporate training development and document translations organization in the world. That org markets its services to other companies (big and small). When Lucent was spun off from AT&T, I moved from international financial engineering to the training division so I would stay within the Bell Labs assets that were to be transferred. This is why I am so familiar with the telecom industry sector.

    By the way; it is that international financial engineering organization within Bell Labs that developed the algorithmic programs for the ‘derivative swaps’ we so often hear about referencing the trading desks of the big money center banks. You see Bell Labs engineers involve themselves in more than telecom issues. It is Bell Labs technology that is behind computer voice recognition and touch screen inputting. A few aisles down from my office were cubicles filled with our own handicapped employees testing these software developments while implementing them to do their everyday project assignments.

    You begin to get the picture. This adds up to big bucks. You posted ALUs new friend Goldman Sacks. Yes that has been a big driver in pushing ALU stock into this run from just under a dollar. But be cognizant that any further misstep moving them back towards cash flow impairment will devastate the equity price again. When I posted ‘on a -20% pullback’__I should have clarified if a pullback is related to another Eurozone misstep/delay or a French government induced delay with ALUs asset adjustments or a contract approval that could be a buying opp.

    The Yahoo ALU msg board is way overpopulated with emotional holders of the security. You get that when so many shares can be bought for a dollar and change. There is a huge group of shareholders hoping to get to back to breakeven that will result in waves of selling pressures as the security moves up. In my thinking that adds risk to option strategies. The Lucent 401k investors were given a period of time to disinvest their holdings or be forced moved out of the stock trust a few years back. They are now restricted from investing in ALU within their plans (not LUTHP though). That has removed those selling pressures. There also are many on the msg board blaming the company’s woes on the French. There is some basis for that since it is very costly and cumbersome (makes it slow) to adjust the European assets (especially labour). Lucent’s American assets are growing again.

    When you posted about wanting 9%__I posted to you ‘LUTHP’ but it has continued to move up. I bought it last July at $554 (13.9% yield to me). It has been a sweet move and since they have to (if solvent) redeem at 1000 it still could be.

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    • part II , thankyou yahoo for waisting my time and eating my posts.

      anyway.... i do not get along with most people in France but i am still drawn to many French things.Such as food,wines,sports and other aspect of culture. Some stocks spark my interest. My last purchase was ve in dec , and it has gone well.

      In the sector you are more common with i have a tiny nok option and positions in ftr,fte for the yield.

      thanks again

    • thankyou for taking the time to write such thoughtfull and instructive posts.
      Unfortunatly, you confirm my fears, on tech. telecom sector...competition is fierce and tech turns on a dime. I will pass on ALU at these prices and most certainly forever. I have many better french stocks to pick from , if i get even more patriotic silly.

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