Alcatel-Lucent provides mobile and broadband networking services. Its products and services includes Carrier Ethernet access and aggregation switch, Network Intelligence portfolio, and Consulting Services.
Jean Raby, a former Goldman Sachs partner/managing director, will become Alcatel's (ALU +2.5%) chief financial and legal officer on Sep. 1. Goldman helped underwrite Alcatel's recent debt refinancing deal. (PR)
Raby will replace Paul Tufano, whose departure was announced in June, in tandem with Alcatel's Shift Plan.
Ericsson (ERIC), Alcatel-Lucent (ALU) and Nokia's (NOK) NSN have each won deals worth around 10% of the total tender. China's Huawei and ZTE have obtained 25% each. Some of these numbers are different from the previous speculation.
The build-out of China Mobile's 4G network should help further pave the way for the mobile carrier, which has over 700M customers, to finally strike a deal with Apple (AAPL), whose upcoming devices are expected to support the operator's 4G TD-LTE technology.
China Mobile (CHL +1.1%) has handed out RMB20B ($3.26B) worth of 4G TD-LTE base station supply contracts. 65% of the orders are reportedly going to local vendors - Huawei (25%), ZTE (ZTCOY.PK - 20%), and Datang (10%) are getting large portions - and the rest are going to Alcatel-Lucent (ALU +3.5%), Nokia (NOK +1.7%), and Ericsson (ERIC +1.9%).
Alcatel is said to be receiving a 13% share of the orders (worth $424M), and Nokia and Ericsson are each believed to be getting 11% (worth $359M). Evercore previously forecast Western suppliers would receive ~30% of the orders.
Altogether, CHL is procuring 207K base stations. The purchases will consume a large chunk of the ~$7B the world's biggest carrier has allocated this year to 4G capex, ahead of the expected arrival of government licenses at year's end.
In the latest in a string of debt refinancing moves that have followed its January deal with Goldman and Credit Suisse, Alcatel-Lucent (ALU +3.2%) has amended two term loan facilities. The interest rate for a $1.75B 2019 facility ($1.74B outstanding) has been lowered to 5.75% from 7.25%, and the rate for a €300M ($400M) 2019 facility (€298M outstanding) has been lowered to 6.25% from 7.5%.
Alcatel had €794M ($1.06B) in net debt at the end of Q2, up €436M Q/Q. Total debt amounted to €5.7B, and cash/investments €4.9B.
Meanwhile, Evercore is encouraged by the fact China Mobile (CHL - just delivered its Q2 report) still has a 2013 capex budget of $31B (+50% Y/Y). The firm sees Western equipment vendors getting ~30% of procurement orders due this fall. Alcatel, a key supplier for CHL's 4G buildout, should get a meaningful portion of that.
CHL has only spent $9.3B on capex thus far in 2013. It plans to spend ~$7B this year on 4G capex, and says it already has 15 phones capable of supporting its TD-LTE 4G network.
Nasdaq-100 futures (QQQ, XLK) -0.5% AH after Cisco provides relatively light FQ1 guidance to go with an FQ4 beat, and also reports Asia-Pac/Japan orders were down 3% Y/Y (macro is blamed).
Networking/telecom hardware vendors and some of their suppliers are naturally the biggest decliners. Many of them have run up strongly this year on hopes of gradually improving carrier capex and enterprise IT spending. ALU -3.3% AH. JNPR -2.4%. ARUN -1.4%. FFIV -2%. ARRS -2.4%. RVBD -3.2%. JDSU -1.6%. FNSR -2.8%. CIEN -2.2%. CAVM -2%.
Alcatel-Lucent (ALU): Q2 net loss widens to €885M from €254M last year and vs expectations of €280M; operating profit €24M vs loss of €86M and consensus for loss of €39.4M.
Revenue +1.9% to €3.61B vs forecasts of €3.48B, with sales boosted by a large increase in revenue from North America.
Takes €552M impairment charge related to the reorganization of the company's wireless business and €194M restructuring charge.
Cuts €120M in costs, cash burn drops to €248M from €517M.
Qualcomm (QCOM) is buying a small stake in Alcatel-Lucent as part of an R&D pact to make new wireless transmitters for homes and offices; ALU plans to seek a total of 3-5 strategic partners that will acquire small holdings.
A roundup of tech analyst ratings changes: 1) (JNPR -2.3%) has been cut to Hold by Jefferies ahead of tomorrow's Q2 report. 2) Alcatel-Lucent (ALU +1.4%) has been upgraded to Strong Buy by Raymond James ahead of its July 31 Q2 report. 3) Nokia (NOK -0.9%) has been cut to Underperform by Oppenheimer following its Q2 results. 4) NeoPhotonics (NPTN +7%) has been upgraded to Strong Buy by Needham. 5) Trimble (TRMB +1.8%) has been started at Buy by Craig-Hallum ahead of its July 30 Q2 report.
There's a $6.5B opportunity - give or take - in Russia over the next six years for telecom-equipment makers as the country's cellular carriers build 4G networks. "The geographic scope, population size, economic demand and growth all indicate the size of the contracts coming out of Russia could be outstanding," says Ovum analyst Daryl Schoolar. Those vying for contracts include Nokia Siemens Network (NOK), Ericsson (ERIC), Alcatel-Lucent (ALU) and Huawei Technologies.
Telecom equipment, chip, and component makers finish up strongly after Needham upgrades Finisar (FNSR +6%), Goldman upgrades Alcatel-Lucent (ALU +6.3%) and Adtran (ADTN +2.3%), and William Blair reports of positive F5 checks. Ciena (CIEN +10.1%), Riverbed (RVBD +4%), Calix (CALX +6.9%), Aruba (ARUN +5%), and JDS Uniphase (JDSU +3.6%), are among the top gainers. Needham says meetings with Finisar's chairman and CEO leave it impressed with the company's positioning and visibility. "Finisar seems more confident in its outlook than it’s been in a number of years." Goldman responds to Adtran's strong top-line results and guidance by declaring it "uniquely positioned to benefit" from a multi-year cable/DSL broadband infrastructure upgrade cycle. (previous)
A roundup of tech analyst ratings changes: 1) Alcatel-Lucent (ALU +3.3%) has been upgraded to Neutral by Goldman (previous). 2) Finisar (FNSR +4.4%) has been upgraded to Strong Buy by Needham. 3) Palo Alto Networks (PANW +5.3%) has been upgraded to Buy by UBS. 4) Jive Software (JIVE -3%) and Sourcefire (FIRE -1.4%) have been downgraded to Neutral by UBS. 5) Analog Devices (ADI +1.7%) has been upgraded to Buy by Jefferies. 6) Synchronoss (SNCR +2.8%) has been added to Wedbush's Best Ideas List. 7) Linear (LLTC +1.8%) has been upgraded to Buy by Jefferies. 8) Adtran (ADTN +4.3%) has been upgraded to Buy by Goldman following its FQ2 report and FQ3 guidance.
China Telecom (CHA -0.6%) doesn't want China Mobile (CHL +0.1%) to have a huge head-start in offering 4G: the #3 Chinese carrier plans to build a pre-commercial 4G network covering 31 provinces by year's end, and will issue an equipment tender in Q4. The timing of a commercial launch still depends on when government licenses (expected early next year) are issued. CHL has said it plans to spend $6.75B in 2013 on its 4G network, but some are wondering where the orders are. CHL's network is based on the TDD LTE standard; China Telecom and Unicom (CHA -0.6%) want to use the FDD standard (more popular overseas), at least outside of densely-populated areas. ERIC, ALU, and NOK stand to benefit from rising Chinese 4G orders.
Cisco's (CSCO +1.8%) dominant 10G Ethernet position has "translated into meaningful share gains across switching and routing markets," says Piper's Troy Jensen in a bullish note. Jensen observes Cisco has a 67% share of the 10G switch market following a March quarter in which port shipments rose 35% Y/Y, and that Gartner sees the market posting a 9.7% CAGR through 2017 in spite of a 15.4% annual drop in price/port. He also thinks "recent security concerns at Huawei and structural issues at Alcatel-Lucent (ALU)" should lead to further share gains. Jensen's comments follow a string of upbeat notes in response to last week's Cisco Live announcements (I, II).
Volatile Alcatel-Lucent (ALU +7.5%) is among the day's big winners; today's gains come 3 days after shares fell 7% during a market rout. Alcatel announced overnight #3 Italian mobile carrier Wind (22M mobile subs + 3M wireline subs) has tapped the company to provide a "network transformation solution" that includes its 100G optical transmission systems, related optical switches, and 7750 edge router.