Alcatel-Lucent (ALU) is fighting for its very survival. The adage that a cornered animal is dangerous applies to companies as well. For the analogy we focus not on the risk to those doing the corning as they are passive and intangible forces at best. Companies rarely play true offense. Everything is balanced against the reactions of shareholders if things to terribly wrong. Sometimes companies do not pay attention and take the plunge. Cisco (CSCO) with its fancy handheld camcorders is an example. That was absurd. That was like a football team who didn’t win the Superbowl saying that they will play baseball this season to win the World Series. That sounds absurd and it has not even happened. Why, then, did Cisco going into camcorders seem like a good idea at the time. In hindsight, sure bad call, but did we need hindsight or was it always evident?
Intelligently playing offense is thinking different and outside the box on your home planet. Alcatel-Lucent is at a make or break moment. It needs to make bold moves, and those moves if successful will actually make the company good. This is tough to properly articulate, but when a company falls on hard times it can be a boon. The measures put in place to keep the company solid in times of turmoil can make it become fantastic when times improve. Cost-cutting is an example of this. Companies cut and cap expenses to compensate for lower or stagnating revenues. That boosts profits by fattening margins. If revenues improve significantly, then the company will enjoy significant increases in profit.
ALU is not in this situation, but the same end of the road benefits can apply. ALU is a company posting serious losses that has a crushing amount of negative sentiment surrounding it. The company needs top tier margins compared to industry peers. It needs top-notch growth, and tight purse strings. If it can achieve these things and incorporate that into the culture, then the company can go from being a terrible one to being a fantastic one. It has been known to happen. The point I am making is that ALU needs to be extremely aggressive about everything. It needs to push its products, and needs to innovate. It needs to solve the problems of customers and be open to all kinds of things. It can’t throw around its weight. There is no guarantee it will take the steps it needs to take, but preliminary signs are good.
If Alcatel-Lucent wants to survive it cannot follow its peers around. It needs to jump ahead of them. The company is focused on innovation. It looks at the next step and seems to jump two steps ahead. That means that it might be ahead of its customers, but its field is wireless and mobile (primarily). That industry is moving fast. Consumers want more and more. I would bet that demand outpaces technology. More importantly it will outpace the will and resolve of companies to make important capital expenditures. ALU is going for better with lower ongoing costs. They offer products that are better than peers but use less energy. Everything I have read suggests that the cost per unit of these new products is reasonable. So it is not like solar panels or hybrid cars where the premium paid will only be earned back in savings at the end of the life of the product (making it green, but not economical). Seems like a solid strategy to re-establish a company.
Obviously, I am just riffing here. If you want something more detailed, then head over to The Market Archive or get the ALU report. I just think that the company is on strong strategic grounds for now, though I think the restructuring could be a bit bolder.
So if you are interested in more deep substantive stuff pick up a copy of the report. Don’t forget to go and get a discount code. There are instructions in that old post.
This is a general say what I am thinking post. Sorry if you don’t like these kinds of posts.
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