Thoughts on Alcatel-Lucent

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Rich Tehrani
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Thoughts on Alcatel-Lucent

Wow. It has been quite a week. I am sitting here in Norwalk, CT – TMC’s headquarters and feel a bit under the weather. This is not a surprise as I haven’t slept since last Friday due the super-busy schedule at ITEXPO (photos and videos). It takes about 24 hours for the extra expo-related adrenaline to empty from your system which subsequently causes a bit of withdrawal. I should probably work from Starbucks the day after an expo. I even showered with my new caffeinated soap this morning and it didn’t wake me up.
 
Suffice it to say you may not be hearing a great deal from me today. In fact I have been working on this post on and off for five hours!
 
I do have some thoughts on the Alcatel-Lucent news which occupied my brain for a good part of the workday. If you haven’t heard, the company’s stock slid a great deal in early morning trading due to a cut in guidance stemming from among other things, the state of American service providers. The wireless market hurt them most it seems.
 
At this week’s ITEXPO I had a chance to survey exhibitors who told me the service provider market was there in force. Most told me there were far more service providers this year than last. Exhibitors also told me the providers were looking to buy. This is a good sign and bodes well for Alcatel-Lucent going forward.
 
But I wonder if part of the reason for the slowdown in sales is a lack of visibility in the US. What I mean is if they are indeed so large and have so much market share, wouldn’t they be promoting themselves everywhere 24x7 to ensure we all know their new logo and begin to associate it with the global leader in telecom equipment?
 
In addition when I analyzed the Alexa rankings of Lucent, Alcatel and Alcatel-Lucent I was surprised to see the combination of websites of the two companies didn’t result in a bump in ranking. In fact the ranking of the combined entity is worse (Alexa numbers are backwards as 1 is the best rank you can have) than Lucent was alone.
 
In this graph, Alcatel-Lucent is in blue, Alcatel is in red and Lucent is in green.
 
Of course there is not a direct correlation between Alexa rank and sales, the number is a good indicator of how much interest (read: buzz) a company generates.
 
CEO Pat Russo is fairly sure the company is not losing share to others. In a Wall Street Journal article she reiterates the company is not losing share and makes a concession later in the piece that we will have to wait to see the actual numbers later in the year to be sure.
 
A challenge she faces is the merger benefits the two companies should see are being slowed down dramatically by the inability to lay people off quickly in France.
 
Obviously as stated in many articles, morale in the company is not at an all-time high which obviously contributes to lower sales. Russo candidly admits this and explains this is to be expected.
 
Other telecom companies competing with Alcatel-Lucent predicted by now the new company would be firing on all cylinders and would be a force to be reckoned with. This is obviously not the case as of yet but could change soon.
 
Russo points out the company is merging 80,000 workers and product lines in 130 countries. It seems the deal size indigestion is the problem and not the markets the company is in. Still one wonders if this situation is similar what happened to HP and Compaq for a few years after their tumultuous merger. Rumor has it Tums is aware of this situation and is working on some new tablets that last years at a time.
 
I can’t help but wonder if amidst all the consolidation challenges if the enterprise division is getting enough attention. Worldwide service provider spending is growing but the enterprise and especially SMB space is growing even faster.
 
Lucent has a crown jewel in Alcatel’s phone systems and it seems a crime to not introduce these into the US now.
 
I say introduce because Alcatel has half-heartedly come into the US market for a decade or more. They seem to be here for a while and then disappear. Again, many European and Japanese telecom companies do the same.
 
Of course expanding focus is easier said than done but still, if analysts are anywhere near correct, enterprise communications will be thriving for some years to come. This is a space the company is already serving worldwide. Maybe now is a good time to refocus more energy on selling such products in the US.


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