Alcatel Lucent Fails To Wow The Crowds

Aug. 5.13 | About: Nokia Corporation (NOK)

Alcatel-Lucent (ALU) today is a company that focuses on providing point-to-point communication systems that deliver either data or voice or both. The customer base includes telecommunication carriers, corporations and even individual consumers.

Alcatel Lucent released its second quarter earnings on July 30, 2013, which had quite a number of market watchers sitting on the fences with baited breath. It's no secret that the stock has ramped up almost 15 percent in just the last few days prior to the earnings release. Further, Alcatel Lucent has been on a rise for months from the lows of $1.50/share to now hitting $2.50/share. Granted, we're not talking about a Google (NASDAQ:GOOG) or Apple (NASDAQ:AAPL) in terms to market capitalization, but the rise of Alcatel Lucent's share has been noticeable, especially for those holding shares when they were worth a lot less.

What the Earnings Call Provided

Alcatel Lucent reported year-over-year growth in two areas right away. North America gross revenue figures were up 19 percent over the previous year at the same time.

In terms of the "great" Shift Plan, Alcatel Lucent's CEO, Michel Combes, noted that the plan is on track with identifying savings and new strategic opportunities, which were left ambiguous during the report. However, Combes did make it clear Alcatel Lucent is launching a new strategic venture with Qualcomm (NASDAQ:QCOM) . Further, the company is putting a lot of emphasis on core programs to bring home the bacon, or at least the growth in sales. Networking, specifically, saw a second quarter growth of 9 percent to operating profits, and is expected to continue to contributing to sales increases. Another area adding to the sales gains involves IP Routing services which grew 26 percent versus the previous year. At the international level, Alcatel Lucent grew a modest 1.9 percent in total gross revenue figures. Even still, when examined at the global level, the IP services still held onto their 25 percent growth.

Fundamental Analysis

Wall Street pundits ended up seeing more revenue growth for Alcatel Lucent, but they were on target that the company's performance per share would still be in the negative. The EPS metric for closing June 30, 2013, posted at -$0.18. Gross revenue and profit did rise. Gross sales and income jumped Eur 410 billion to Eur 3.6 billion. Gross profits rose from Eur 947 million in the first quarter to Eur 1.15 billion in the second quarter. However, expenses also went up considerably, with a jump from Eur 3.5 billion to almost Eur 4.3 billion, most of it due to a Eur 700 million increase in "unusual expenses." Because of this fact, the company's figures came in worse than expected, which were expected to post an EPS of -$0.11.

Reflection and Views

People aren't fools. Many are quite aware that Alcatel Lucent has floundered for years since it merged two companies in 2008 and created the entity it is today, bleeding millions instead of making money. As a result, a number of options have been placed on the stock, fully expecting Alcatel Lucent to drop back down near $2/share in the next few weeks, making profit along the way for those shorting the company.

Granted, as a stock, Alcatel Lucent has had a good run for the first half of the year. Those lucky enough to have held Alcatel Lucent prior to the rise have made good money on the stock. However, anybody coming in late to the party, especially those enamored with the grand Shift Plan, are in a very risky position to see their investment position lose money buying at $2.50/share. New investors are probably far better off waiting to see what happens and finding a lower buying point to enter.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.