Analyst cuts Alcatel-Lucent on late margin boost

Analyst cuts Alcatel-Lucent on worries material boost to margins won't come until late 2010

• On 12:43 pm EDT, Tuesday September 1, 2009

PHILADELPHIA (AP) -- Shares of telecommunications equipment maker Alcatel-Lucent fell Tuesday after an analyst downgraded the stock due to concerns that the company's restructuring efforts may not materially boost margins until late 2010.

Credit Suisse analyst Kulbinder Garcha said the stock has risen by about 80 percent year to date and investors will now switch their focus to Alcatel-Lucent's ability to deliver improved margins as a result of its restructuring efforts.

But he said "material evidence" of margin improvement may not appear until late next year, hence the stock downgrade to "Neutral" from "Outperform."

He is forecasting operating margins of break-even in 2009 and 3.9 percent in 2010, after accounting for 750 million euros ($1.1 billion) of cost reductions.

However, Garcha said the estimates are "generous" and Alcatel-Lucent may not get proof of sustained profitability until late 2010.

He kept his target price at 3 euros ($4.29). But Garcha sees more attractive investment opportunities elsewhere, such as Research in Motion Ltd., Motorola Inc. and Palm Inc.

Shares of Paris-based Alcatel-Lucent fell 19 cents, or 5.1 percent, to $3.56 in early afternoon trading.