The French telecommunications company, Alcatel-Lucent (ALU), continues to show strong growth prospects with its acquisition of a governmental contract in Uruguay. This contract comes from Antel, the Uruguayan government-owned telecommunications company, as they push to boost the capacity of its mobile ultra broadband. The type of small cell technology that Alcatel-Lucent provides Antel gives the Uruguayan telecom the ability to extend coverage in areas that were previously served by large towers whose installation is resource heavy.
As one of the year's top performing stocks in 2013, with a jaw-dropping return of 225.93%, Alcatel-Lucent seems to have lost steam in 2014. Indeed, it is safe to say that their returns will not be on the same scale as last year's, but they remain a good buy as they position themselves to show even greater returns in 2015. This is particularly true when they are compared to rivals, such as Cisco (NASDAQ:CSCO), who is embroiled in scandal at the moment. Here is why.
1. Alcatel-Lucent continues to diversify. In addition to the above example, the company is reaching out to different sectors to open itself to other opportunities. A case in point: the sale of 85% of its enterprise business to China Huaxin. Though Alcatel-Lucent's stocks have seen their past six months opening and closing prices hover around the high $3 and low $4 range, this announcement prompted a strong opening and closing of $4.47. This momentum carried the company well into March.
2. Alcatel-Lucent's partnership with Qualcomm (NASDAQ:QCOM) gives it strategic focus in ultra broadband, cloud and IP routing technologies. This technology is especially useful when it comes to small cell sites which has already resulted in the above mentioned award of a contract to Alcatel-Lucent by Uruguay's government owned telecom. This announcement gave Alcatel-Lucent a opening bid of nearly $4 and the stock prices are steadily in the upper $3 range.
3. Alcatel-Lucent's philosophy continues to be forward thinking and visionary. Its research arm, Bell Labs, collaborated with net mobile AG to deliver Context-Aware Video Streaming. This innovative technology seeks to provide users with the ability to have high quality video streaming while they are traveling. Tapping into the huge demand for seamless video streaming that continues to deliver high quality, especially when there is no need for more network capacity, will only position Alcatel-Lucent more firmly as a stock to buy.
4. Alcatel-Lucent currently has a solid ranking at Zacks as a #3. Zacks also bills it as a Hold stock. This ranking is based, at least in part, on the company's strong growth in areas such IP routing which gave the company an increase in revenue of 12% - adjusted for inflation - for first-quarter figures over the same time period in 2013. This speaks well for the expectation that the company will continue to grow and become more valuable.
5. Alcatel-Lucent's Shift Plan outlines the company's strategy to hone its focus on IP networking and ultra-band access. This shift is slated to be 85% of the targeted areas for Alcatel-Lucent's R&D team in 2014, resulting in a 15% increase in revenues by 2015. Given the highlights outlined above, the company is well on its way to penetrate these areas of the technology market even further while also maximizing its global reach to previously untapped markets.
Alcatel-Lucent also pledged to slash operating costs by EUR $15 billion by 2015. This plan is already set in motion with the company cutting such costs by 12% just last quarter. Though negative dips are to be expected in the stock as it navigates through these changes, the long-term bullish outlook does not change. Alcatel-Lucent shows even more strongly today that it is a stock that you want to already be holding when it reaches its goals in 2015. Being prepared will put you in an excellent position to either continue to ride its success or to sell at a handsome profit.
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