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Research Recap: ALU, MOT, Q

Phil Harvey
7/30/2009

4:10 PM -- Here's a quick recap of the research that has hit my desk today:

  • Alcatel-Lucent: Watch out world, analysts are saying Alcatel-Lucent (NYSE: ALU) is suddenly a tolerable risk again. Mark Sue (RBC Capital Markets ) ups his price target for the stock to $3. "Demand challenges remain yet the company is making incremental progress in sharply reducing its cost structure," he writes. AlcaLu definitely has a hot fire under its ass these days. (See Asset Sale Helps AlcaLu to Q2 Profit, AlcaLu CEO Pitches Recovery Story, and LTE: AlcaLu's Flagship.)

    Simon Leopold (Morgan Keegan & Company Inc. ) says Alcatel-Lucent is an attractive stock because the valuation is reasonable and because the company's financials are improving "with the operating margin turning positive in Q4 and near breakeven for the year."

    On the valuation, Leopold adds that AlcaLu's 2009 enterprise value divided by its sales (EV/sales) is 0.2x, compared to Ericsson at 0.7x. (Having a lower EV/sales compared to peers means a company may be undervalued.) Leopold writes that "the gap is simply too big, and considering the company’s strategic importance to the world’s top carriers, we see it as a good long-term investment."


  • Motorola: Mark Sue (RBC Capital Markets ) tosses up a Hail Mary: "The worst may be over for Motorola Inc. (NYSE: MOT) in our view and if the company executes on the timely delivery of new devices and improves its cost structure, the challenged mobile devices division may turn a profit next year." Indeed, there is a lot riding on the next crop of devices, and our reporting suggests that only two of those gadgets are important to the company's co-CEO, Sanjay Jha. (See Motorola's Android Outlook.)


  • Qwest: The carrier's results yesterday weren't much to speak of, but Paul Bonenfant (Morgan Keegan) says Qwest Communications International Inc. (NYSE: Q)'s fiber-to-the-node (FTTN) activities and its metro fiber buildouts are helping Adtran Inc. (Nasdaq: ADTN) and Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA), respectively. "Qwest reaffirmed its intent to pass three million homes by year-end with its fiber to the node (FTTN) build-out, from 2.6 million currently, using Adtran's TA 1100 and TA 5000 platforms to enable the DSL upgrades," Bonenfant writes. He adds that the carrier has come close to finishing three of six new metro fiber rings it has planned for the year, based on Tellabs' 7100 transport system.


  • Online video distribution: Adi Kishore (Heavy Reading) writes in this month's Contentinople Insider that, in a recent survey of media companies, he finds there is a lot more video that could be made available online. More than 11 percent of the survey's respondents even said they had no plans to distribute video online. Largely, content owners still see the Internet as an experimental medium, where they need to have some branding and a presence. But do content owners feel the need to replace older distribution methods any time soon?

    Another key finding from the survey: Quality matters. (See Quality Is Key to Online Video, Study Finds.)


  • Briefly: George Notter (Jefferies & Co. Inc. ) says CommScope Inc. has some big earnings power. "We would buy the shares on any weakness today," he writes. Kimberly Watkins (JP.MorganChase ) honed in on Commscope's outlook, though. "Revenue guidance of $750-800M was very weak, falling almost ~$100M below our prior $877M estimate at the midpoint," she writes.

    Steven J. O'Brien (JP MorganChase) found Sonus Networks Inc. (Nasdaq: SONS)'s results a bit shocking: "We are surprised by the quick snap-back in demand allowing Sonus to quickly return to profitable levels."


  • Finally: Don't forget you can find all the earnings-related announcements from the past few days right here.

    — Phil Harvey, Editor-in-Chief, Light Reading

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