Guarded Optimism on Alcatel-Lucent

Since being created as a result of the 2006 merger of the two companies that confer its name, Alcatel-Lucent has struggled unsuccessfully to reach profitability. It’s still struggling for financial stability, but some market watchers and analysts believe there’s light at the end of the tunnel. What’s more, they believe the light in question isn’t coming from an onrushing train.

There is reason for guarded optimism. Operationally and strategically, Alcatel-Lucent is on firmer ground than it has been for quite some time, even in the face of stiff macroeconomic winds and a chronic component shortage that has affected the company’s ability to deliver products.

You’ll notice, though, that I employed a qualifying adjective in the first sentence of the preceding paragraph. Alcatel-Lucent still has work to do.

The company depends on the sustainability of a real broad-based recovery in the global economy — carriers will constrain their network-infrastructure spending if they believe smartphone-toting consumers will curtail their consumption of data-rich applications and data services — and it must work harder to make headway in emerging markets. In the latest quarter, North America carried the day for AlcaLu, and numbers everywhere else were down.

Moreover, as Ray LeMaistre notes and documents at Light Reading, Alcatel-Lucent needs better growth from its Applications and Services divisions, which are strategically important to the company’s long-term prospects. AlcaLu is looking to differentiate itself from lower-cost Chinese network-equipment rivals such as Huawei and ZTE by providing software-led value with its Application Enablement strategy, buttressed by its Developer Platform and its Open API Service.

By bringing developers and carriers together, and providing integration services bridging the two camps, Alcatel-Lucent hopes to make itself more valuable to both. There’s still time for the strategy to play out, but higher rates of growth from those parts of the business would be encouraging.

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