He believes that "if there is any silver lining" it is that AlcaLu may be forced to ramp up its headcount reduction program or sell off some assets.
The vendor's restructuring plan currently includes job losses of 12,500, but it isn't providing any details about further cost-cutting measures until October 31, when it reports its third quarter earnings. (See Alcatel-Lucent Job Cull Hits 12,500.)
But the company did tell Light Reading in an emailed response to questions that a recent realignment of its business provides "an opportunity for us to do more streamlining, more rationalization" that would impact the vendor's Carrier Business group and supply chain activities.
Lindberg and his Dresdner colleagues believe AlcaLu should cut its headcount by 30,000 to reduce operating costs to an optimum level. He also suggests that the vendor might consider closing down its WCDMA wireless operations, even though Alcatel acquired Nortel's WCDMA assets just a year ago for $320 million, and believes the company might even put Bell Labs up for sale. (See Alcatel Snags Nortel 3G Unit.)
He explains: "Spears, of course, has so much potential as a singer/entertainer, yet her recent troubles make her one of the most maligned Hollywood stars around."
Adds Notter: "It's the same with Alcatel-Lucent in the communications equipment space. The company has lots of future potential but isn't generating any rave reviews from investors right now. We're even reminded of Spears's hit song 'Oops! ...I Did It Again.' The company has now negatively pre-announced three times as a combined entity."
Unlike Lindberg, Notter believes AlcaLu can be a success. "We continue to like the concept of the Alcatel-Lucent merger given industry trends toward carrier consolidation, excess equipment vendor manufacturing capacity, etc. The business clearly has significant scale and areas of particular strength," notably in CDMA infrastructure, access systems, and Professional Services, "to name a few."
AlcaLu's revenues revision was caused by changes in the capital expenditure plans of unidentified North American wireless operators, widely identified as CDMA operators Verizon Wireless and Sprint Corp. (NYSE: S). Windsor notes that the CDMA infrastructure market in North America "has been a big let down," and that any upside in AlcaLu's valuation is unlikely to happen "until the wireless hemorrhage is stemmed and CDMA spending resumes."
AlcaLu wouldn't say whether it expects the wireless carriers in question to spend more in 2008 to make up for the reduced spending in the second half of 2007 but claims it hasn't lost any market share in the North American CDMA market as a result of the operators' new spending plans.
Alcatel-Lucent's share price closed today on the Paris stock exchange at €6.50, down nearly 2 percent Friday. The company has seen its valuation fall by nearly 40 percent this year.
— Ray Le Maistre, International News Editor, Light Reading