This Just In: Upgrades and Downgrades: Alcatel Lucent SA (ALU), Nokia Corporation (NOK)

Foolish takeaway
Much as I’d love to say that Morgan Stanley is right, and all’s well with Alcatel at long last, the truth is that Alcatel’s problems remain — and it’s going to take more than a single quarter’s positive cash earnings to fix them. Or more succinctly: “One quarter does not a trend make.”

And one more thing…
This last point is not directly related to Friday’s Alcatel upgrade, but still bears mentioning: Rumors are apparently flying about a possible breakup of the telecom equipment manufacturing joint venture — and Alcatel archrival — between Nokia Corporation (NYSE:NOK) and Siemens AG (NYSE:SI).

As Bloomberg points out, the revival in telecom infrastructure spending here in the U.S. has yet to make its way across the pond. And apparently, Siemens isn’t interested in waiting around to see when it will make a comeback. Citing sources with knowledge of the negotiations, Bloomberg says that Siemens wants to cash out its 50% interest in Nokia Siemens, and is floating the idea that Nokia and Alcatel could make a joint offer for the stake.

The obvious objection to this idea is that neither Nokia nor Alcatel is exactly flush with cash right now. Nokia recently suspended its dividend to conserve cash. Alcatel — as noted above — is busy burning what little cash it has left. How Siemens thinks either of these companies would come up with the money needed to take its JV stake off its hands is a mystery… but if the rumors do turn out to be correct, that’s an additional area of concern that Alcatel shareholders should watch out for.

Long-term, grabbing a piece of the once-again profitable Nokia Siemens might be a good business move for the long-term. In the short-term, however, it would only weaken Alcatel’s balance sheet further.

The article This Just In: Upgrades and Downgrades originally appeared on Fool.com and is written by Rich Smith.

Fool contributor Rich Smith has no positions in the stocks mentioned above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he’s currently ranked No. 339 out of more than 180,000 members.The Motley Fool has no position in any of the stocks mentioned.

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