Alcatel-Lucent SA on Tuesday said it would sell its 49.9% stake in Draka Comteq BV to Dutch networking company Draka Holdings NV, which formed the optical fiber and cable joint venture with the telecommunications gear maker in 2004, for ¤209 million ($299.6 million).
Although Paris-based Alcatel-Lucent gave no reason for exiting the venture, the sale reflects the company's struggles to cut costs and streamline its operations after several quarters of sagging financial results. Alcatel-Lucent has had to lower sales and revenue guidance three times over the past year and has yet to announce the sort of sweeping restructuring that has been required to lift the financial performance at other telecom equipment companies.
In a research report on Monday, UBS Investment Research analyst Nikos Theodosopoulos lowered his price target on Alcatel-Lucent's stock from ¤7 to ¤6, citing the company's specific challenges along with tough industry conditions for networking companies, which face intense pricing pressure and mounting global competition. He also expects sales of technology for mobile networks, once a source of growth for Alcatel-Lucent, to continue declining in 2008, following drops over the previous two years, and cited U.S. Commerce Department data showing potential weakness in capital spending by the telecom carriers that are Alcatel-Lucent's main customers.
Alcatel-Lucent shares traded Tuesday at $7.32, down from $13.15 at the time of a December 2006 merger that united Alcatel with Lucent Technologies Inc.
In addition, Theodosopoulos described some new signs of trouble integrating the merger of Alcatel and Lucent. "Our sources suggest that there are still come cultural issues that may be slowing down integration and execution somewhat," he wrote. "We don't see a quick turnaround on these matters but expect the company to actively pursue rightsizing businesses and reducing headcount by an additional 4,000 as previously announced."
Alcatel-Lucent CEO Patricia Russo earlier this year announced plans for 4,000 job cuts on top of the 12,500 cuts that had previously been made in connection with the merger. However, she has rarely discussed any plans for additional layoffs or asset sales, and her restructuring plan has been widely attacked for not doing enough to address the company's weak performance.
Although Alcatel-Lucent has not articulated its strategy for making acquisitions or divestitures, it has done a series of deals since completing its own merger. In September, the company acquired Tamblin Ltd., a London startup developing Internet protocol-based television technology, for an undisclosed price. That same month, it acquired Thompson Advisory Group, which provides telecom consulting services, and over the summer bought Tropic Networks Inc., an Ottawa company that makes technology to help speed data transmission over telephone and cable lines.
But critics have been unimpressed, saying that such smaller transactions are insufficient to address the sort of broad changes the company requires.
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