Something that I do not discuss in my long, long research report is all the past and recent deals that Alcatel-Lucent (ALU) has been closing.
There are also bigger deals in the mix do not get me wrong, but the smaller ones actually have values attached. There is one for $14.1M and so on. There are other deals like the one with a Belgian telecom. These deals are great as they keep the cash coming in. Rome was built brick by brick. It would just be extremely tedious to go over every deal. I am not going to incorporate all those into some model, because that is not my style.
Getting a Foot in the Door
It is enough to know that the company is doing all it can to win customers. No profitable contract is too small. As long as it does not drain resources it is acceptable to conclude small deals. The reason is that getting your foot in the door helps. I do describe the products in my research report. I discuss some of my favorites in thorough detail. Products make a company what it is. Alcatel-Lucent has a lot of administrative and financial problems, but it is never going to get out of these without solid products, which I think it has. In my report I discuss lightRadio and both the edge and core routers. The great thing about all of these is that they all work together.
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Each product is capable of working with equipment from other vendors, but do not underestimate the benefits of going with the same vendor. That level of compatibility can lead to fewer headaches. I discuss a lot about how the technology works and each product’s place in the overall wireless and networking ecosystem. LightRadio takes in the mobile data, the edge router sends that data to the core, and the core router forms part of the internet. There is a bit more too it, but that is the stripped down summary. If you want to know more you can pick up the report, otherwise you can walk away with just the summary. Not here to win over casual ALU readers.
Revenues Add Up
There have been a few of these smaller deals for the last few months. In the aggregate they are all important. Not only might they be precursor to bigger deals, but as a whole they add up. Someone needs to be the vendors for these companies. Alcatel-Lucent is a broad company. If you think it is odd that a company with $19B in revenue has news coming out about $14M deals, then you’re clearly not aware of Alcatel-Lucent’s recent situation. That $14M is part of the key to ALU’s future success.
Not to mention that other than a few high-profile names, most people are unaware of all the service providers out there. All of them need equipment even if they are small. If you win the small customers and it really improves their networks to the point that it dings the big dog, then that big dog is going to notice your product. Winning customers is never a bad thing. While nothing seems able to move Alcatel-Lucent’s stock the long case requires patience. I urge this in my report as well. Alcatel-Lucent is not for the impatient. You need to let the company’s changes occur and play out fully. You need profitability to return, then you need the market to finally trust that Alcatel-Lucent is out of the woods. I do not go over that psychology too much in my report, because it is of little importance why you need to be patient.
Going back to products for a moment, Alcatel-Lucent’s products have some key features that can make them winners in the market. The jist of it is, they are high-powered for low energy consumption compared to competitors. You should be aware that power and heat are some of the major concerns for today’s technology fortresses. Google’s server farms have the same concerns as rows and rows of core routers. It can’t get too hot, and they need a lot of juice. Between running the equipment and running the cooling system, electricity is a major expense. Alcatel-Lucent’s boxes seek to minimize power consumption. Heat is just a general issue, and almost all products attempt to dissipate heat as much as they can. With a properly designed building heat dissipation is less of an issue long-term compared to electricity consumption. The upfront cost of building a good building for cooling is fine, but electricity is an ongoing cost. The new core router is power efficient, and lightRadio sips power compared to the big cell towers it seeks to replace.
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It is also a way to support my endeavors to bring a different style of research to all of you. I am sick of quantitative analysis that gives the impression of certainty or competence. Numerical projections didn’t save anybody during the dotcom bubble or 2008. None of those models incorporate a crap storm. I like qualitative research. It might be fuzzier, but at least you know its fuzzier. Numbers appear definite, but are no better.
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