I wrote about Alcatel when the company first announced its 'merger of equals' with Lucent Technologies (LU). I believe that the merger of Alcatel and Lucent will be mutually beneficial. By consolidating, Alcatel will gain key inroads to the U.S. market and Lucent’s IP portfolio. Lucent will gain key exposure to the European market and better long-term growth prospects.
Alcatel has seen steady declines since announcing its merger with Lucent. I believe there are looming fears over a mid-year spending slowdown in the telecom industry. Lucent has also recently announced declining demand for its wireless networking gear.
I believe ALA is oversold and being dragged down with LU as investors digest the possible long-term implications of Lucent announcement. I expect to see a rebound in ALA and I am setting my target sell price for ALA at $14 in 3-6 months time.
ALA 1-yr chart: