It is amazing how the majority of the news can be positive for a company, but one negative story can really pull it down. It can have an even more profound impact when that news event highlights the difficulties the company has already been facing. Alcatel-Lucent (ALU) has found itself facing one of these bad events, and it seems unlikely that the more minor positive stories can make up for it. The struggles revolve around the hostility that came out at the shareholder meeting. Alcatel-Lucent is struggling in the aftermath of this event, but it may have bigger things in store for its future that could offset this news.
Shareholders have begun to express concern over what they consider to be mismanagement of the company. Alcatel-Lucent has shown promise in turning things around, but Chief Executive Ben Verwaayen had to postpone his expected deadline for "taking the company to a break-even cash flow." Recently, at the annual shareholder meeting, speeches were interrupted, and the general atmosphere was quite hostile. Verwaayen recognizes that the company has made improvements, but that these have not been substantial enough. This bad press will harm the company's reputation even further. Shareholders seem to have little confidence in the company, and this may translate to drops in the stock.
At the same time, the company has been building a better reputation. In today's world, going green is becoming increasingly important. Alcatel-Lucent has recently made the news for reducing its carbon footprint by 22% since 2008. It has plans to decrease this to only half of the 2008 levels by the year 2020. The company is also working to improve the energy efficiency of many of its products. While this may only have a minor effect on the company's reputation, it will help to begin offsetting the hostility that was present at the shareholder meeting. I do not expect this to have a huge effect on the stock, but its environmentally-conscious approach will likely give it strength as these issues continue to become increasingly important.
Alcatel-Lucent is also making a small move toward growth by providing a 4G LTE network for Smile in Tanzania. Smile is the first company to offer "lightning-fast mobile broadband services including live video chat and TV streaming." While this is not a huge market, it does help Alcatel-Lucent get involved in this market early, as these developments may lead to more in the future. Once again, this may not be enough to get around the hostility of the shareholders and the questionable performance of the company, but it does help portray this company in a better light.
This is not the only positive move toward growth. The company has also made an agreement with West Central Wireless to bring high-speed mobile broadband to rural Texas. This is again a development taking place in a localized setting, so it will only have a limited impact on the stock. These smaller moves are not what the investors need to see if Alcatel-Lucent hopes to reduce the animosity that it recently encountered. As a whole, this will benefit the company and the stock, but Alcatel-Lucent still needs to do something more significant.
Large changes are the ones that will make the most notable differences in the stock. This is clear for competitor Nokia (NOK), as it surged in the stock market after rumors developed about a possible buyout from Samsung. This was in addition to suggestions that Nokia's Lumia sales have been steadily increasing. While Nokia stock finally pulled out of the slump it had been in, one should always be cautious in moving forward when the increases have been based largely on rumors.
Continuing to look at the industry, other some companies appear to be decent investments, although Alcatel-Lucent should not be ruled out yet.
For investors willing to take risks, there may be some large changes coming in a number of communications equipment stocks. Ciena (CIEN) will be addressing the importance of the optical market to the future. This market is expected to be growing and play a big role in the future. Ciena will likely face competition in the optical market, however, and its competitors may include Alcatel-Lucent, Cisco (CSCO), and eventually Juniper (JNPR). This may eventually benefit Alcatel-Lucent, therefore, as it will become clearer that it is in a good place for future growth. Cisco will also receive attention from its Cisco Live! event, where it will address its new intelligent network product. The expectation is that this will place the company in a good place for future growth. As a result of all this, I do not think these stocks will see great improvements soon, but they do appear to be fairly good long-term options for investors.
In addition to the Cisco Live! event, Cisco stock will benefit from the recent announcement that Cisco and EMC (EMC) will be offering an infrastructure solution that will run on the SAP HANA platform. This will be beneficial for businesses, and there appears to be a high demand for this kind of service. As technology is becoming an increasingly important part of business, it is great for these two companies to be growing in this part of the industry. As a result, I expect both of these stocks to be doing well in the near future.
Despite the opportunity to potentially play a competing role in the optical market, this is far down the road for Juniper. Furthermore, the company is struggling after it was downgraded from a buy to a hold rating, which was in response to share losses and greater competition. As the market may only continue to become more competitive, this is not great news for the company. Following the decreased confidence, I expect Juniper stock to continue struggling and fall further.
Alcatel-Lucent has been making some slight improvements that will help offset the damage from its past performance and the recent shareholder meeting. This will likely continue to have negative effects and keep the stock down for the moment. Cisco and Ciena may be better stocks to invest in at the moment, but Alcatel-Lucent's outlook for the future remains strong. It may become a major player in the growing optical market, and its small moves toward growth may begin to accumulate and benefit the company. While Alcatel-Lucent stock may do poorly in the short-term, I do expect much better things from it in the long-run.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.