Alcatel Lucent SA (ADR) (NYSE:ALU) has been focusing less on growth and more on improving its product mix to derive more revenue from higher margin products. This makes sense, since the company has to keep a lid on R&D. The last earnings call made me slightly comfortable knowing that they increased R&D expense a little for some products in order to keep innovating. It needs to innovate, but also needs to take a tightfisted approach to R&D expense. That is a tough balance and will probably test the new CEO. Focusing on higher margin products will allow the company to try and boost profits without having to spend a ton of money developing and marketing something new.
Cisco finally arrives
Cisco finally had an earnings report that helped the stock move past its $20-$21 range. The movement was the day after earnings, followed by some cooling off, and then back into the $24+ area it hit the first day following earnings. Cisco Systems, Inc. (NASDAQ:CSCO) beat on the top line, which I think is the main reason the stock finally reacted. Cisco has done well on the bottom line for quite some time, but people have wanted to see growth above and beyond expectations, which seems a bit ridiculous. Despite the lack of share price movement, Cisco’s revenue has been on an uptrend. The growth story at Cisco is over, and it seems that people are not yet ready to accept this, but the company is still growing.
I am still looking for something new that Cisco Systems, Inc. (NASDAQ:CSCO) is trying to get excited about. For now, I just like the company. After the last earnings call, I closed my Jan 2014 $30 calls for a nice profit. Cisco has been a stock that goes right back to its $20-$21 range when it gets some bad news or the market has a couple of bad days. I was always a bit uneasy that the calls were at $30 for 2014. I would have preferred $30 for 2015, but the price was not there. I will be keeping an eye out for a new position, but have nothing planned.
Conclusion
I still have nothing on Juniper Networks, Inc. (NYSE:JNPR)’s potential future. SDN is nice, but it is at least a year out and increasingly crowded. The PTX line that they just released is interesting, but it not likely to really make the difference in the company’s results. I like Alcatel Lucent SA (ADR) (NYSE:ALU), but it is getting harder and harder to see the light. I like it for its opportunity to turn itself around, but the window is closing. The company has new leadership and we have zero information on how its new CEO will progress in this new role.
For now, I maintain my bullish stance on Alcatel Lucent SA (ADR) (NYSE:ALU). Cisco Systems, Inc. (NASDAQ:CSCO) is a strong company, and I think it will continue posting solid earnings and see its stock move higher. I am looking for a re-entry point.
Nihar Patel has the following options: Long Jan 2014 $2.5 Calls on Alcatel-Lucent (ADR) and Long Jan 2015 $3 Calls on Alcatel-Lucent (ADR). The Motley Fool recommends Cisco Systems (NASDAQ:CSCO).
The article Analyzing Networking Companies’ Mostly Lackluster Earnings originally appeared on Fool.com.
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