Alcatel-Lucent: Too Soon to Hang Up the Phone by Matthew Curtin and Kenneth Maxwell
Summary: Alcatel-Lucent (NYSE:ALU) shares got creamed last week (-12%) when, after less than two months post-merger, CEO Patricia Russo warned about weak sales and income. Investors have concluded her warning is the final word on the merger - a misguided notion. If anything the warning reflects a difficult Q4 due to an investment freeze at AT&T Inc. (NYSE:T) while they ironed out their own merger details with BellSouth Corp. (BLS), and a general slowdown in telecom spending. The company hasn't even had time to implement much of its new plan. In 2007 it expects to see €200 million in merger-related savings, ballooning to €1.4 billion by 2009. Sales should pick up as operators start spending again, and ALU leverages its strong market positioning across fixed-line, wireless and Internet segments.
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