Alcatel-Lucent (ALU) is a world leader in providing telecommunication products and services on a global scale. Alcatel-Lucent was formed in 2006 after the merger between Alcatel and Lucent Technologies, which would later prove to be quite profitable for both parties. It currently employs about 80,000 individuals and operates in 130 countries worldwide.
With rumors and speculation running rampant in the world of telecommunications, some investors have found themselves unable to make up their minds with regards to whether they should buy into Alcatel-Lucent. After conducting in-depth research on industry trends and analysts predictions, I have been able to draw my own opinion of Alcatel-Lucent's future stock performance.
Its direct competitors are Cisco Systems (CSCO), Nokia (NOK), QualComm (QCOM) and Ericsson (ERIC). Looking at the price-to-earnings ratio, Alcatel-Lucent is trailing behind its chief competitors at 3.6, which some critics eagerly point out is less than a quarter of Cisco and Ericsson at 15.6 and 17.2, respectively.
The above competitors have been quite overpriced, and Alcatel-Lucent is a stock that investors should look at more closely. I attribute this to the fact that the market is undergoing changes, and with the initiative that it has taken to merge, it will be better equipped to grow at an exponential rate.
Although Alcatel-Lucent still has a long way to go in terms of surpassing its competitors in market capitalization, it will only be a matter of time before this happens. Currently, Cisco enjoys a market capitalization of about $108 billion, while Ericsson stands at $31 billion. Alcatel-Lucent has a market cap of $5 billion. I attribute this large gap to the fact that its competitors have been trading way before its introduction.
In legal matters, Alcatel has had a number of court cases primarily related to patents. The most recent lawsuit has been with Microsoft (MSFT), which just recently came to a surprising end earlier this year. The lawsuit filed by Alcatel claimed that Microsoft had violated a patent with the use of its technology in the creation of Outlook and different windows mobile applications.
Alcatel had demanded $70 million in compensation, but later reduced the figure to almost a third of its initial settlement fee. However, after confidential meetings between the two firms, they decided to drop the case and settle the matter privately. This proved to be a great call as the litigation process was proving to be costly, which was later highlighted in the judge's ruling that directed Alcatel-Lucent to pay its own fees along with those of its attorneys. The manner in which the settlement was agreed upon proved that Alcatel-Lucent was able to fight its legal battles on conventional terms and showed its adaptability to different situations.
Despite Alcatel-Lucent's legal troubles, it has been able to do some positive things for its shareholders. With its recent sale of Genesys by Primera, a European private equity firm, profits seem to be right around the corner. Genesys is a leading provider of customer service based enterprise software that greatly enhances customer interaction with different organizations.
Through the sale of Genesys, which was valued at around $2.5 billion, Alcatel-Lucent was able to generate a considerable increase in its revenue, which will go into producing better products and services. Genesis is estimated to facilitate the interaction of over 100 million customers and serves nearly 100 government agencies.
With quickly changing trends in the telecommunications industry, Alcatel-Lucent has had to adapt and establish itself as a leader in this field. It has thus endeavored to branch out into different markets such as those in Africa and India. Though the diversification of its products and services, it has been able to effectively increase its annual revenue along with its assets. Its investment portfolio has also grown substantially, as it has bought a stake in several different organizations.
By continuing along this path, I expect substantial increases with regards to its stock price. When looking at the quarterly revenue growth of the stock on a year-on-year basis there have been major signs of improvement that have been a constant reminder for me to remain unwavering in my faith in this stock.
The quick transition of the economy to a technological and communication centered one gives me confidence that Alcatel-Lucent will lead this field not only in terms of services and net worth, but also in terms of sales. Analysts predict an extremely bright future for the company, and I am inclined to agree with them.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.