Networking has been having a tough time. 2012 was just an awful year, and 2013 was off to a slow start. I took my time writing an earnings article, because I wanted to wait for Cisco Systems, Inc. (NASDAQ:CSCO) to join the bunch and give it some thought. As far as initiatives go, Alcatel Lucent SA (ADR) (NYSE:ALU) needs to do more if it plans on returning to profitability. Juniper Networks, Inc. (NYSE:JNPR) needs to do more about growth, but it is in a steady position and does not need severe expense-cutting.
Less coddling, more cutting
I was disappointed by Alcatel Lucent SA (ADR) (NYSE:ALU)’s recent earnings, because the expense reductions were in the millions. The company wants to cut 1.25 billion euro by the end of 2013, and if this quarter just had about 100 million euro in cuts. I suppose it is almost one-twelfth of the way there, but it is prudent to take a “wallet half empty” approach.
The company cannot hope to reach its goal if it uses kid gloves. More aggressive cuts are needed, and hopefully, Q2 will show far larger cuts. The reason for this is that the company should be early in its expense-cutting. It cannot all be hard cuts that need constant thought. The company would not be in this situation if it was not bloated with things that could be easily lopped off.
Before declaring absolute Armageddon, the first quarter of 2013 was the last quarter for CEO Ben Verwaayen. At the start of the second quarter, Michel Combes took over. It could be that the first quarter was not as aggressive because the CEO was just focused on wrapping up anything already started instead of taking on new things. That allows Combes to start with as clean a slate as possible. Apparently, Combes does have a history of effective belt-tightening. There is no time for a learning curve, since the first quarter showed little progress.
Make more money, simple
Juniper’s earnings were met with some sadness as revenue missed by $10 million. It might just be that financial news sites were looking for something to report that explained Juniper Networks, Inc. (NYSE:JNPR)’s drop. There are very real concerns about revenue growth at Juniper, and it could be that revenue being seen as flat was actually the cause of the drop.
I went through Juniper Networks, Inc. (NYSE:JNPR)’s products online trying to find out if there was anything that would really set the company on the path to continual and regular revenue growth. A lot of the products I looked at formed alternative to other Juniper products. Price and volume might make revenue rise a little, but overall, it is diversity within a similar line of products. It might win over a few customers, but it will not increase what your current customers buy. Juniper Networks, Inc. (NYSE:JNPR) might be at the point that it needs other offerings that fit around its current products as a way to increase revenue. Cisco Systems, Inc. (NASDAQ:CSCO) had to do the same thing once it hit a certain point.