Alcatel Lucent SA (NYSE:ALU) is doing everything right

Posted by Peter Lauro September 18, 2013 0 Comment 1537 views

Alcatel Lucent SA (NYSE:ALU) has been doing very well for itself lately and there are 4 key factors that have led to this uptrend. The company’s revenues have been on the rise, its cash-flow is improving, its costs are decreasing and it is focusing on Research and Development. In addition to this, based on its investments in research and development, the company also signed a wave of contracts. What is left to be seen is whether this upside has been priced into the company’s stock just now.

Revenue boost

In the Q2, the company saw a boost in revenue growth. This steady revenue-growth in effect backed the trend that had begun in the Q1. Alcatel Lucent SA (NYSE:ALU)’s management is also prioritizing the Shift Plan implementation. This reorganization plan has been laid out in 2013 June

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and the process will reach completion by September end. The company has already achieved 50% of the fixed cost-saving target of $399m (300 million Euros), for the current year.

In the short term, rebalancing R&D from the legacy technologies to the next-generation resulted in an increase in spending. With these contracts taken into account, over the past 3 quarters the company has secured 45 new contracts.

Big deals

One of the major deals has been with Qualcomm. Via this collaborative deal, Alcatel Lucent SA (NYSE:ALU) will develop multi mode small cell-base stations that will enhance 3G, 4G and networks. These will help in improving the wireless connectivity in different residential-enterprise environments. Another important factor is that Alcatel Lucent SA (NYSE:ALU) has been cash-flow negative since the time it acquired Lucent Technologies in 2006.

The company’s recent contract –successes have also raised the demand for its working-capital over the short-term. However, the restructuring charges will be spread over the next 2 years. If all goes as planned, the company should be free cash-flow positive by the year 2015.

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