Alcatel Lucent SA (ALU): This Telecom Giant Faces Tough Challenges Ahead

Nevertheless, Ericsson (NASDAQ:ERIC) and Cisco Systems, Inc. (NASDAQ:CSCO) are in much better financial condition than Alcatel Lucent SA (NYSE:ALU). They have negligible debt issues compared to the French giant. In fact, Cisco’s third-quarter earnings report was very much appreciated by the market. The company experienced substantial growth in emerging markets and boosted its dividend by 20%.

Ericsson (NASDAQ:ERIC) recently made a bold move to acquire Microsoft’s Mediaroom business. For a company that is known as a global telecommunications service provider, this acquisition was a step outside the box. The acquisition of Mediaroom will put Ericsson into the IPTV business, which is growing pretty fast. It can also provide a safety cushion against declining prices in the networking & communication industry.

It seems that Alcatel Lucent SA (NYSE:ALU) needs a miracle to make a complete turnaround. As a matter of fact, the board is doing something about the generally weak financials by installing a new CEO, Michael Combes. He used to be the head of Vodafone Group Plc (ADR) (NASDAQ:VOD)‘s European operations. He took over the top management position in April. He is expected to announce the company’s turnaround strategy plan by June.

With his experience in the European market, he is expected to improve the market share of Alcatel in Europe. Michael Combes is a veteran in the telecom industry. He also has a reputation of being an excellent cost-cutter. He is just what the company needs at this point amid year-over-year negative free cash flow and rising debt. However, cost-cutting is just one piece of the puzzle. There are other tough challenges that must be dealt with such as the declining market share.

No one can tell what his plans are. But one thing for sure, Alcatel Lucent SA (NYSE:ALU) shares are going to face another major shakeup. When Combes reveals his turnaround strategy for Alcatel-Lucent, shares can react either uphill or downhill. Until then, trading on Alcatel-Lucent remains driven by speculations.

The article This Telecom Giant Faces Tough Challenges Ahead originally appeared on Fool.com.

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