Big news out of Alcatel Lucent SA (NYSE:ALU) today.
First, the company reported fourth-quarter results. Sales fell 1.3% year over year to $5.5 billion, resulting in a $0.80 net loss per share. Revenue was in line with analyst expectations, but the bottom-line result fell far short of the $0.07 expected loss per share.
On top of that, CEO Ben Verwaayen announced that he’s leaving Alcatel-Lucent later this year. “It was clear to me that now is an appropriate moment for the Board to seek fresh leadership to take the company forward,” he said in a press statement. Verwaayen will stick around to help his board of directors find a replacement, but he’s definitely out after five years at the head of the French-American telecom equipment company.
The one-two punch took 8% off Alcatel’s share price this morning. Investors clearly expected stronger quarterly results, but it’s unclear whether Verwaayen’s exit is seen as a boon or a bust. The company has made some sensible moves to improve operations lately, including a properly thought-out round of cost-cutting that didn’t damage crucial research and development budgets. Alcatel has refinanced expensive debt instruments and secured new funding in order to keep the lights on.
In short, Verwaayen has done everything he could to give Alcatel-Lucent an opportunity to come back from the brink of death. Telecoms the world over have been cutting back on infrastructure upgrades while this whole macroeconomic crisis drama plays itself out. If the company is still around when the telecoms open their checkbooks again, the turnaround could be fantastic.
Recent comments from equipment rivals underscore the opportunity. Juniper Networks, Inc. (NYSE:JNPR) handily beat analyst targets last week, and CEO Kevin Johnson said that telecom spending is coming back online. At the same time, network security expert Fortinet, Inc. (NASDAQ:FTNT) showed strong sales in the service provider division. These are exactly the customers that Alcatel-Lucent would lean on when the turnaround comes.
But it’ll have to happen under new leadership. I’m not at all sure that this is the right time to introduce turnover and uncertainty in Alcatel’s executive suite.
The article What’s Wrong With Alcatel-Lucent Today? originally appeared on Fool.com and is written by Anders Bylund.
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