Seeking Alpha

Wade USMC's  Instablog

Wade USMC
Send Message
New to investing, and as the saying goes, I have acquired just enough information to be dangerous. That being said my personal view point is long term, and dividend investing. While market momentum may peak my interest from time to time I'm still looking at an overall macro view of where any... More
My blog:
SA Blog
  • Alcatel-Lucent Act 2 0 comments
    Aug 8, 2013 11:44 PM | about stocks: ALU

    I have not followed Alcatel-Lucent (NYSE:ALU) for a long time. I only heard about them because they are an equipment supplier for Sprint (NYSE:S). I was invested in Sprint when it was trading sub $3. I no longer hold positions in Sprint. ALU like Sprint when I first invested had some serious distress signals. The market was speculating on the companies imminent departure, more bluntly bankruptcy. Sprint was also in the midst of a massive company turnaround, it's Network Vision plan. ALU is currently still in turnaround mode. If you haven't figured it out I am a Value/Speculative investor, trying to see if I can strike gold again.

    ALU has some very good things going for itself. Namely its IP unit, SDN, R&D department, and recently a new CEO with experience righting ships. It has also been thoroughly documented they are going through a massive cash burn and even as recent as 1Q 2013, is still burning huge amounts of cash. This has some believing the bleeding has not stopped and the company will continue to hemorrhage, and rightly so. For as much as I can tell ALU has been on a turnaround plan since the merger of both the Old Alcatel and Lucent.

    Without going into very complex fundamental analysis, I think 3Q 2013 will continue to tell a different story. So in order to take a position in ALU you have to have a couple of beliefs.

    1. The company is not going to go bankrupt.

    2. The new CEO has a plan

    3. The new CEO can execute that plan

    4. ALU is still a viable competitor in the industry.

    So is the company going to go bankrupt? They received a huge loan backed by its patent portfolio in December of 2012. They have core and even non-core assets it can sell off, one that has been mentioned but nothing confirmed is the submarine cable unit. If ALU is going to go bankrupt it wont be for a very long time, at least not in the next two years.

    As of recent ALU has made in roads into the core router arena with its core router the 7950 XRS, it's small cell light radio, VDSL2 vectoring, and SDN technology through Nuage. Without compiling a list there has been a steady stream of new contracts for the company also. However one can point out that part of ALU's problems stem from non profitable contracts. So the question is has ALU structured these new contracts to make money with decent margins?

    All in all ALU is not for the squeamish. This stock's volatility is not for the faint of heart. Currently the stock is trading significantly higher than it's 50d and 200d SMA's. However, it is still in turnaround mode with latest earnings report showing some much needed improvements.

    So where does ALU go from here? Well that will depend on ALU's execution going forward. Should you invest? That depends on your own risk tolerance, but hopefully this information helps you decide one way or the other.

    Disclosure: I am long ALU.

    Themes: Telecom Stocks: ALU
Back To Wade USMC's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

Latest Comments


Most Commented
  1. BAC: A Long Term Truth (1 Comment)
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.