Has Alcatel Lucent SA (ALU) Become the Perfect Stock?

Alcatel has suffered throughout the last year from extremely tough conditions in the telecom equipment space. A weak economic environment in Europe has held back sales there, and major U.S. telecoms AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ) have seemed content to defer capital spending on equipment, forcing Alcatel to deal with volatile order flows from its major customers.

Alcatel hasn’t been completely void of success. Its deal in December to sell networking router equipment to Telefonica S.A. (NYSE:TEF) to help the telecom company upgrade its network should be a substantial piece of business, and an agreement with China Mobile Ltd. (NYSE:CHL) to help it roll out its 4G network is a very positive sign in light of Huawei’s rise in the market. Yet competitors Ericsson (NASDAQ:ERIC) and Nokia Corporation (NYSE:NOK) are still dwarfing Alcatel’s market share, and Alcatel has had trouble keeping cash coming in and needed a $2.1 billion credit facility in order to refinance debt and try to reduce its financing costs.

Yesterday, Alcatel released its latest earnings, showing a much larger than expected loss of $0.81 per share for the full 2012 year on a nearly 6% drop in revenue. The stock sank 7% on the news, and CEO Ben Verwaayen responded by announcing that he would step down once the company chooses a successor.

For Alcatel to improve, it really needs to focus on utter survival. With new leadership coming in, now will be a make-or-break time for the telecom equipment maker to demonstrate its ability to keep operating. Otherwise, a sale or reorganization may be in the cards for Alcatel.

The article Has Alcatel-Lucent Become the Perfect Stock? originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of China Mobile.

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