3 Key Numbers for Alcatel-Lucent Investors
By Investopedia | June 01, 2015
Many sectors of the stock market have been ripe for consolidation, and among telecom-equipment stocks, Alcatel-Lucent (NYSE: ALU) has joined the merger craze by agreeing to a combination with industry peer Nokia (NYSE: NOK). Yet Alcatel is still focused on trying to grow regardless of its merger-and-acquisition efforts, and the telecom equipment company believes that it has several avenues for future growth. To give some insight into the company's strategies to accelerate its growth, below you'll find three key numbers that every investor in Alcatel-Lucent should be aware of.
0.55
Perhaps the most important number for Alcatel-Lucent investors in the immediate future is 0.55, which corresponds to the number of Nokia shares that investors will get for each Alcatel share they own. With no cash involved in the deal, investors who don't want to own the combined entity after the merger will have no choice but to sell off their Nokia shares. Indeed, Nokia's decline since announcing the merger suggests that investors have gotten a head-start on selling, using short-sale strategies to lock in their exposure based on the belief that the deal will go through.
As a result, Alcatel-Lucent investors have to pay attention to what Nokia's long-term plans are. As other players in the industry consider M&A moves of their own, Alcatel-Lucent might end up being one of the biggest beneficiaries in the sector by getting a head-start over its rivals.
1.685 billion euros
In recent years, Alcatel-Lucent has generated considerable losses from its operations. That has been bad news for investors, but the potential silver lining is that those losses can help shelter future profits from taxation as long as future earnings don't exceed accumulated net operating losses. Currently, Alcatel-Lucent has indicated its deferred tax assets are worth 1.685 billion euros.
Mergers always complicate deferred tax asset planning, especially given that Nokia has net operating losses of its own to manage. Nevertheless, Alcatel-Lucent believes that it should be able to use all of its net operating losses over time, especially since it has an indefinite period of time to use them in Europe and has until 2021 before its deferred tax assets start losing value.
700 million
The technological advances in the U.S. and other developed countries have transformed the nature of the telecom industry, especially for telecom-equipment providers that have had to adapt to changing technology very quickly. Yet despite those advances, the world still has more than 700 million people and businesses served by older public switched telephone network technology, and figuring out how to move those people effectively to newer voice service based on Internet-protocol broadband service has been a challenge.
Now, though, Alcatel-Lucent has launched a new service designed to bridge that gap. The PSTN Smart Transform program combined consulting and design services with help in planning the transition and actually taking care of the process of migrating consumers to newer services. Alcatel hopes that by handling these issues on their own terms, customers will reap extra profits due to lower operating expenses at the same time that they bulk up their offerings of broadband and bundled services to their own end-users.
There's plenty of competition within the voice-over-Internet-protocol market, with a host of providers ranging from well-known established telecom providers seeking to catch up with the rapid pace of change in the industry to upstarts seeking to cash in on the more sluggish responses from large firms. Still, with Alcatel already playing a key role to many potential users of this service, the telecom equipment maker hopes to do its customers a favor and broaden the range of services Alcatel can provide to its most valued clients.
As Alcatel-Lucent moves forward with its merger plans with Nokia, it nevertheless has a strong vision for what will come next for the telecom-equipment company. Even if the Nokia deal doesn't work as well as many experts hope, Alcatel-Lucent has done a good job of getting this far and has a fighting chance to produce even better results from its strategy going forward. |
