Alcatel-Lucent (ALU) has to face some tough shareholder questions as it consistently continues to underperform on the stock market.
Investors in Alcatel Lucent are starting to lose their patience quickly. Its stock price, as well as sales, are down and have been or a while now. The company is simply not living up to the expectations that its shareholders have for it, a significant problem for the Paris-based telecom. In the last year, the company's stock price has fallen substantially and shareholders would like to see a turnaround in this situation. The drop is caused by an unfavorable revenue mix and a lower volume, as well as the fact that service providers have tightened their spending with this particular company.
The impatience of the company's stockholders became dramatically apparent at the most recent shareholders meeting. The meeting, at best, could be described as raucous. At this particular meeting, shareholders asked dozens of questions of the company relating to the financial situation, specifically with regard to "the company's turnaround strategy, its cash position and the direction of CEO Ben Verwaayen". In addition, they were openly impatient when it came time for Alcatel-Lucent's chief financial officer to do a presentation. One shareholder even went as far as saying that he did not put any trust in the directors of the company at all. Hopefully this shareholder stands in isolation and this is not a view that is widely felt. If it is, Alcatel is in even more trouble than I initially thought it was. A lack of investor trust often heralds the end of a company's success.
The company has a few plans up its sleeve for dealing with this problem. Alcatel plans to instigate $500 million in costs savings this year. It also noted that over the last five years it has saved a total of $3 billion on costs. However, Verwaayen openly admits that this is far from being sufficient to address the problem. At the shareholders meeting, Verwaayen attempted to lighten the mood by pointing out the company's recent achievements. However, without a significant return for investors on these achievements, there is little that can be said to appease the shareholders.
Alcatel is still on a relatively stable footing at present, despite the above mentioned problems and the added issue that comes in the form f a huge amount of debt that the company may soon have to repay. It's not at its strongest, but it may not yet be beyond recovery.
In recent news, competitor Frontier Communications (FTR) announced its intention to expand its broadband operations in the state of West Virginia. This is a significant move for the company as it has identified West Virginia as a market that needs a boost in terms of technology. The new expansion is aimed at providing broadband across the state and could turn West Virginia into one of the most wired up states. At present, it is one of the least wired up stats and needs a bit of a boost to get going. This move will also improve the economy in the area.
Competitor Sprint Nextel (S) will soon just be called Sprint as the company begins to unravel. In recent news the company hired a subsidiary of Black & Veatch to help it start making this major change. Essentially what this means is that the Nextel network will be shut down altogether. This could happen as soon as the end of the month. This is big news for the company indeed, but I think that it marks a step into the modern era as this is necessary in order for a complete network upgrade to occur.
Verizon (VZ) has introduced new shared data packages for its customers, but there is some question as to whether these packages are worth it or if they in fact waste your money. What the company has done is created a system where a flat rate is paid per device that you use the internet on each month. After that rate you buy a single data package that can be split between up to ten different devices. However, because there are so many price considerations involved and because the pros and cons depend on a number of circumstances, it is difficult to decide if this is a better deal than what came before.
AT&T (T) has developed dual-personality software for mobile devices which it soon plans to expand. This expansion will mean that the software, known as Toggle, will provide PCs, Macs and mobile devices with "a walled-off and encrypted work environment". The service has been available on Android devices for a while. The new expansion could take a long time to come to the market. The due date has not yet been specified, but I feel that it will not belong. Innovations from companies such as this one are what make the tech stock market such an interesting one to play.
Alcatel-Lucent needs to come up with a way to appease its shareholders, and it needs to do this soon. The company has been a consistent disappointment over the last few months and it seems that this is a trend that will only continue from here on out. A lack of investor trust, which is something that we may see hints of here, is potential sign that the company is on the down slope form which recovery is incredibly difficult. The company has achieved some positive things of late as well, but this is hardly enough to account for the distinct level of underperformance that we see from the stock. A comprehensive plan of action is needed if Alcatel-Lucent wants to be known as a good stock to own.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.