Technology StocksAlcatel-Lucent (ALU)

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From: Sam2/14/2012 10:54:12 PM
   of 176
Alcatel-Lucent Seen as Leader in Wireless Capacity Fight: Tech February 14, 2012, 9:55 PM EST

Alcatel Rises on Profit Forecast, Patents Strategy: Paris Mover
Alcatel-Lucent Joins Ericsson, Kodak to Chase Cash From Patents

By Olga Kharif

Feb. 14 (Bloomberg) -- Sprint Nextel Corp. is in talks to use new Alcatel-Lucent telecommunications gear designed to help wireless networks handle more calls. The discussions reflect the industry’s race to avert a capacity crunch for mobile service.

Alcatel-Lucent’s lightRadio, introduced a year ago, is a Rubik’s Cube-sized device that contains radios and antennae and can be mounted on rooftops, phone poles and bus shelters to expand a network’s capacity in a given spot. LightRadio is one of several new technologies created to help the mobile-phone industry cope with the rising tide of calling and data that’s putting a strain on mobile networks just as the wireless airwaves -- or spectrum -- used to carry traffic grow scarce.

As consumers do more Web surfing and application downloading on devices such as Apple Inc.’s iPhone and tablets using Google Inc. Android software, mobile-data traffic will surge 26-fold in the five years through 2015, Cisco Systems Inc. estimates. And with limited spectrum available, mobile-service providers are looking for ways to squeeze more from existing capacity. That has Alcatel-Lucent and other gear makers racing for part of the $36 billion that Ovum predicts U.S. phone companies will devote to capital spending in 2012.

“We use technologies to mine spectrum as much as possible,” Bob Azzi, senior vice president of network at Overland Park, Kansas-based Sprint, said in an interview. “That can give us some wiggle room along the way.”

‘Spectrum Crunch’

Multiple U.S. carriers are testing lightRadio and may begin deploying it this year, Marcus Weldon, chief technology officer at Paris-based Alcatel-Lucent, said in an interview. He declined to identify the carriers. Representatives of Dallas-based AT&T Inc. and Verizon Communications Inc., based in New York, declined to comment.

“We are in a spectrum crunch,” Weldon said.

Alcatel-Lucent rose as much as 4.2 percent in Paris trading today and was up 3.6 percent at 1.71 euros as of 9:42 a.m., valuing the company at 4 billion euros ($5.3 billion).

For the past two decades, the U.S. government has helped carriers meet increased demand by auctioning off large blocks of airwaves, used to carry calls and data. Freeing new spectrum has emerged as a “crucial challenge,” Federal Communications Commission Chairman Julius Genachowski said in a speech last year. Even after new auctions happen, it would take several more years for the buyers to deploy the spectrum.

As a result, U.S. carriers may grow more dependent on new technologies to keep up with escalating user demand.

‘Waiting’ for the FCC

“The No. 1 issue for us as we move forward, and for the industry, I believe, continues to be spectrum,” AT&T Chief Executive Officer Randall Stephenson said during a January earnings call. “This growth cannot continue without more spectrum being cleared and brought to market. And despite all the speeches from the FCC, we’re all still waiting.”

Qualcomm Inc., the biggest maker of mobile-phone chips, has developed its own software and chips for small cells -- these the size of a cigarette pack -- designed to boost network capacity.

New capacity-boosting cells augur an overhaul of the design of wireless networks, which now rely on placement of large, expensive cell towers that transmit signals between handsets and the vast underground fiber-optic cable networks that send calls instantly across the globe.

“It’s going to change the way that networks get deployed, and we’re going to get the data rates through the devices up pretty dramatically by using that,” Paul Jacobs, CEO of San Diego-based Qualcomm, said during a November conference call with investors.

Revamp Costs

A recent survey by Informa Telecoms & Media showed that 60 percent of carriers say small cells of various types will be more important than traditional cells in advanced wireless networks.

Revamping networks won’t come cheap. Each cell has to be attached to existing equipment. The market for outdoor cells like those from Alcatel-Lucent could rise to as high as $8 billion by 2016, according to ABI Research. U.S. wireless carriers will increase capital spending 10 percent to $36 billion this year, according to London-based Ovum. That’s double the rate of last year.

“There’s a real concern: Can we keep up with demand?” Alcatel’s Weldon said. “There’s only one solution, and it’s a difficult solution to afford. Carriers can’t afford to increase spending much. All this means, they’ll take longer to do it. Network congestion is always going to be a factor.”

Capacity constraints already interfere with call quality and download speeds in highly populated areas. According to J.D. Power & Associates, 13 percent of all calls made with smartphones experience some degradation.


“There are already isolated, but regularly occurring congestion issues in major cities,” Peter Rysavy, president of consulting firm Rysavy Research, said in an interview. “Over time, usage will increase, and it will constrain usefulness of the service.”

Carriers such as Sprint are coping in other ways, including shifting more traffic to local Wi-Fi networks, and using software to adjust mobile video so it takes less bandwidth during peak hours.

Sprint is also buying capacity from other network owners, such as Bellevue, Washington-based Clearwire Corp. As a result of the Clearwire arrangement, Sprint won’t face a spectrum crunch until 2016, Azzi said.

Clearwire is in discussions to provide airwaves to other carriers, Clearwire CEO Erik Prusch said in a recent interview.

“Spectrum deficiency really gets large in 2013-2014,” Prusch said. “We are talking to a lot of players, anybody who’s in need of it.” He declined to identify other carriers.

Rising Prices

Another option is for carriers to raise consumer prices, discouraging network use. Tim Horan, an analyst at Oppenheimer & Co., expects U.S. service providers to raise prices on wireless contracts at a faster pace in the coming years.

“They are going to either charge for usage more or increase the minimum amount” paid for a data plan, Horan said in an interview. AT&T in January increased the cost of its cheapest smartphone data plan for new customers to $20 a month, from $15. Several carriers moved away from unlimited data plans to limited plans last year.

For some carriers, technological innovation may do most to avert the capacity crunch, said Reed Hundt, a former chairman of the Federal Communications Commission.

“God only made a certain amount of spectrum,” Hundt said in an interview. “To go beyond that you have to have a different architectural solution, and that’s where micro cells come in.”

--With assistance from Ian King, Ari Levy and Tom Giles in San Francisco. Editors: Tom Giles, John Brecher, Nick Turner

To contact the reporter on this story: Olga Kharif in Portland at

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To: Sam who wrote (125)2/14/2012 10:56:16 PM
From: Sam
   of 176

“Licensing is a hot trend in the tech sector right now, but if these numbers turn out to be true, then maybe Alcatel should stop everything else and do only licensing,” said Thomas Langer of WestLB Equity Markets in Dusseldorf, Germany.

Alcatel-Lucent Joins Ericsson, Kodak to Chase Cash From Patents
February 13, 2012, 12:15 AM EST

Alcatel Rises on Profit Forecast, Patents Strategy: Paris Mover

By Marie Mawad

Feb. 10 (Bloomberg) -- Alcatel-Lucent, the latest technology company to announce plans to make money from its patents, may generate several hundred million euros this year alone from its trove of 29,000 rights, Chief Financial Officer Paul Tufano said in an interview today.

France’s largest telecommunications-equipment maker is offering access to its patents through a licensing syndicate. Asked whether the deal with RPX Corp. would generate a few hundred million euros, Tufano said: “More than that.”

After consuming about 3.5 billion euros ($4.6 billion) in cash over five years since the 2006 merger of Alcatel SA and Lucent Technologies, the Paris-based company is following rivals such as Ericsson AB to set up a licensing strategy as spending by phone operators on network gears slows. Alcatel-Lucent could generate 500 million euros to 1 billion euros in revenue in 2012 from the patents, according to four analysts.

“Licensing is a hot trend in the tech sector right now, but if these numbers turn out to be true, then maybe Alcatel should stop everything else and do only licensing,” said Thomas Langer of WestLB Equity Markets in Dusseldorf, Germany.

Simon Poulter, a spokesman for Alcatel-Lucent, declined to comment on the revenue projections.

Google Inc. bid $12.5 billion last year for Motorola Mobility Holdings Inc. as part of a growing trend of technology companies buying patents to defend themselves again intellectual-property suits.

Voice Recognition

Eastman Kodak Co., the photography pioneer that filed for bankruptcy protection last month, is seeking to license its brand to other camera makers as it exits the market in the first half of 2012.

Alcatel does not plan to sell its patent portfolio, which includes voice-recognition and videoconferencing technology, Chief Executive Officer Ben Verwaayen said on a conference call. “By syndicating the patent portfolio, we found a creative way to extract value without weakening ownership.”

Asset disposal has been part of the CEO’s turnaround plan for the company. Verwaayen, who took over in 2008, has sold a stake in the aerospace manufacturer Thales. Alcatel-Lucent this month completed a $1.5 billion transaction to sell its Genesys call-center software unit to Permira Advisers LLP.

Alcatel-Lucent rose 12 percent to 1.69 euros as of 2:21 p.m. in Paris trading. The stock jumped as much as 22 percent earlier today, the most since October 2008, after the gear maker forecast higher profit margins and positive cash generation in 2012.

Last year marked the end of Verwaayen’s three-year strategy to return the company to a profit. Alcatel reported its first full-year net profit in six years, though it has pushed back to 2012 its goal of generating positive cash flow.

Alcatel Chairman Philippe Camus praised Verwaayen in a Nov. 18 statement, after the Wall Street Journal reported that the company’s board was facing investor pressure to replace the CEO.

--Editors: Kenneth Wong, Simon Thiel

To contact the reporter on this story: Marie Mawad in Paris at

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To: Sam who wrote (126)2/16/2012 6:20:52 PM
From: Captain Kana
   of 176
I originally bought in last year when I read about cube technology. The approach for patents should be great.

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To: Captain Kana who wrote (127)2/17/2012 12:10:31 AM
From: Sam
   of 176
That is when I first bought it too. Averaged down a couple of times, sold some for a tax loss last year, still well under water on it, but think it will eventually work out. Just will take (a lot) longer than I thought a year ago, that's for sure!

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From: Sam2/17/2012 11:13:36 PM
   of 176
Telefonica Said Poised to Pick Alcatel on Spanish Network
By Manuel Baigorri and Marie Mawad - Feb 17, 2012 12:59 PM ET

Telefonica SA (TEF), Spain’s biggest phone company, is poised to award Alcatel-Lucent (ALU) an order to build a nationwide high-speed wireless network as it seeks to win back customers of data-hungry devices lost to rival operators, two people with knowledge of the matter said.

Alcatel-Lucent (ALU), France’s largest phone-equipment maker, is the front runner to supply gear for the network based on the so- called long-term evolution technology, said the people, asking not to be identified because the deliberations are confidential. Telefonica plans to unveil details on its network strategy later this month at the Mobile World Congress in Barcelona, one of the people said.

Alcatel-Lucent jumped 5.1 percent to the highest price in more than three months. Telefonica may need to spend about 300 million euros ($394 million) to build the LTE network to cover about 65 percent of the Spanish market, based on the amount Vodafone Group Plc (VOD) invested in Germany, according to Robin Bienenstock, an analyst at Sanford C Bernstein in London. Madrid-based Telefonica is seeking to bolster its Internet offerings as competition increases in a weakening home market amid the debt crisis.

“LTE will be important, especially in rural areas” where download speeds may be limited to about 2 megabits per second, Bienenstock said. “In the absence of significant cable coverage, Telefonica’s wireline customers are threatened by faster speeds available through LTE, hence the company has to build LTE to prevent further revenue declines in these areas.”

Trial Networks A Telefonica spokesman declined to comment, as did a spokesman for Paris-based Alcatel-Lucent.

Alcatel-Lucent rose 9.1 cents to 1.87 euros in Paris, the highest level since Nov. 3. The stock has gained 55 percent this year, valuing the company at 4.3 billion euros. Telefonica climbed 1.4 percent to 13.05 euros in Madrid, snapping two days of losses.

In September, Telefonica announced that Alcatel would help set up test LTE networks in Madrid and Barcelona for businesses and institutions. The plan was to extend high-speed services to all segments in the market from companies to consumers.

At the end of September, Telefonica had 24.1 million wireless customers in Spain, a market with a wireless penetration rate of 129 percent, according to the company. Telefonica competes with Vodafone Group Plc and France Telecom SA’s local units as well as TeliaSonera AB’s Yoigo division.

During the first phase of the trial networks, Alcatel- Lucent (ALU) provided network infrastructure and China’s Huawei Technologies Co. supplied USB modems.

Ericsson, Nokia Siemens Alcatel-Lucent is pushing fourth-generation wireless technologies to compete with Ericsson AB and Nokia Siemens Networks. The French gear maker was selected by AT&T Inc. (T) and Verizon (VZ) Wireless to deploy next generation networks in the U.S.

The company held a 30 percent share of the 4G equipment market at the end of September, according to data compiled by researcher Dell’Oro Group. It trails Ericsson, whose share is estimated at 44 percent.

Alcatel-Lucent is involved in 70 LTE deployment trials worldwide, according to its website, including with China Mobile.

To contact the reporters on this story: Manuel Baigorri in Madrid at; Marie Mawad in Paris at

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To: Sam who wrote (129)2/18/2012 12:09:08 PM
From: Captain Kana
   of 176
That's more good news. Almost double the volume yesterday, and climbing in price. I bought more. Probably will on Tuesday too.

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From: Sam2/29/2012 11:49:31 PM
   of 176
Bell Labs' lightRadio cube has big first year, wows crowds at Mobile World Congress

Published: Wednesday, February 29, 2012, 7:30 AM
By Sarah Portlock / The Star-Ledger

It’s been a busy year for the lightRadio cube, a device developed at Bell Labs in Murray Hill that could change the face of wireless technology as we know it.

The crowds at this year’s Mobile World Congress — a who’s who of telecom meeting in Barcelona this week — are flocking to the Alcatel-Lucent booth, eager to test out the device that could replace those unsightly cell towers with a block the size of a Rubik’s cube.

Yesterday, lightRadio network was named best infrastructure technology by GSMA, the trade organization that hosts the conference and represents nearly 800 of the world’s mobile operators. LightRadio, which is 2.3 inches in diameter, debuted at last year’s Mobile World Congress.

The device was created as a response to the growing customer demand for stronger data and voice capabilities on their smartphones. Current antennas must be large and tall because they rely on sending signals downward and outward, like an umbrella. But the lightRadio’s signals are more direct, which uses less power while handling as much as 30 percent more capacity than the towers. It can be attached to light poles or buildings, and only requires a network connection and a power source to work. The device will include wirings for all carriers and cell phone technologies, including 2G, 3G and now 4G, which is also known as the LTE system.

Alcatel-Lucent and China Mobile — the world’s largest carrier with 650 million subscribers — announced a partnership yesterday to develop and test activities with lightRadio at Alcatel-Lucent’s lab in Stuttgart, Germany.

On Sunday, Telefonica, whose customers are in 25 countries across Europe and Latin America, announced the first live test of the 4G network over lightRadio, and by now the cube is supporting 1,000 users at the event.

And on Feb. 14, Alcatel-Lucent, which is based in France but has more than 3,000 employees in New Jersey. said it was developing the cube to work as a WiFi network.

"The year has been busy, to say the least," said Tod Sizer, a Little Silver resident who leads Alcatel-Lucent’s wireless research division and came up with the cube’s prototype. "People started to see the vision that we had described and understand it, and, most importantly, figure out how it could be useful for them."

There are seven international partners, including Telefonica, China Mobile and Etisalat in the United Arab Emirates, an Alcatel-Lucent spokeswoman said, and the device is currently in the Verizon LTE Innovation Center in Waltham, Mass.

"The ability for us to pair with the world’s largest mobile provider to gain deeper insight into its customer behaviors and the way services are evolving will ensure we develop lightRadio in the right direction," Altatel-Lucent CEO Ben Verwaayen said in a news release about the China Mobile deal.

Industry watchers said lightRadio is the best effort to date to solve the growing wireless data usage crisis. Even if it works as advertised, it is only one solution, said Jeff Kagan, a telecommunications analyst.

"We will still need many more ideas like this one," Kagan said.

"If this works well," he added, "I can see Alcatel-Lucent will have wireless carriers beating a path to their door, at least for the near future."

Sarah Portlock: (973) 392-5994 or

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To: Sam who wrote (131)2/29/2012 11:51:05 PM
From: Sam
   of 176
Alcatel-Lucent,China Mobile partner to work on lightRadio development projects
Published 29 February 2012

The two companies will co-work on a series of projects including the cube-based radio, baseband unit pooling and redefining the radio architecture

Alcatel-Lucent and China Mobile have signed an agreement under which both teams are conducting joint development and test activities on a series of lightRadio projects to accelerate the introduction of new product family.

The two companies will co-work on a series of lightRadio joint development projects including the cube-based radio, baseband unit (BBU) pooling and redefining the radio architecture.

By bringing together talents from both companies, the projects will support China Mobile's business initiatives, including the introduction of high-speed TD-LTE mobile broadband technology, encourage idea-generation and facilitate the smooth commercial implementation of lightRadio.

The agreement builds on the collaboration between the companies on the delivery of mobile broadband using TD-LTE technology and the announcement of the Trans-Pacific lightRadio video call.

Alcatel-Lucent's lightRadio reduces the size of traditional mobile base stations to a Rubik's cube, while lowering power-consumption and allowing the transfer of vast data at improved speeds.

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To: Sam who wrote (132)2/29/2012 11:52:55 PM
From: Sam
   of 176
ALCATEL-LUCENT : and Etisalat make the first 4G LTE mobile broadband connection in the United Arab Emirates using lightRadio™

Companies mark a crucial milestone in the move toward the commercial introduction of lightRadio to address the exploding demand for high-speed mobile data services

Barcelona, February 29, 2012 - Alcatel-Lucent (Euronext Paris and NYSE: ALU), together with Etisalat, the leading mobile telecommunications operator in the United Arab Emirates, have successfully completed a technology trial with the groundbreaking lightRadio™ portfolio highlighting how it can meet fast-growing customer demand for high-bandwidth mobile broadband services.

This is the first mobile broadband connection made in the United Arab Emirates made possible by Alcatel-Lucent's lightRadio architecture over a working 4G LTE network.

Alcatel-Lucent showcased the capabilities of its new lightRadio Metro Radio Outdoor (MRO) product at Etisalat's headquarters in Abu Dhabi, making the lightning-fast data connection over Etisalat's commercial 4G LTE network, also powered by Alcatel-Lucent. This new offering is part of Alcatel-Lucent's market-leading lightRadio Small Cells product family, and based on the lightRadio cube. It extends a service provider's LTE network to provide hot-spot coverage in densely populated areas such as shopping malls, airports, and sports stadiums.

In the United Arab Emirates, demand for high-speed connections to mobile broadband services such as videoconferencing and on-demand TV has been driven by the mass take-up of smartphones, tablets and other mobile devices. In October 2011 Alcatel-Lucent and Etisalat signed an agreement to jointly develop the most sustainable and efficient way to meet this demand using the groundbreaking lightRadio portfolio. This successful trial of the latest technology marks a major milestone in turning that promise into a reality.

Tests conducted prior to the successful trial showed that service providers deploying the MRO in their LTE network could see improvements in capacity and performance that would allow them to realise cost savings of up to 40% while delivering high-quality, lightning-fast 4G LTE data services to subscribers.

H.E. Ahmad Abdul Karim Julfar, Etisalat Group Chief Executive Officer said: "Etisalat is proud to be part of this program, helping to shape the future of mobile broadband networks to satisfy our customers' growing demand. With lightRadio we will not only be able to accommodate this growth in traffic, but we will also be able to offer our customers the most innovative solutions so they can easily access the latest and greatest mobile data applications on their mobile device of choice."

Stephen Carter, President, Europe, Middle East & Africa, Alcatel-Lucent said: "We are happy to have the opportunity to work with Etisalat to leverage lightRadio to address their business needs. The work completed as part of this successful project has yielded valuable data about how service providers such as Etisalat can very easily deploy Alcatel-Lucent's metrocells to transform the mobile broadband experience for their customers, while at the same time reducing their power consumption, costs and equipment footprint."

The successful mobile data connection was made using Alcatel-Lucent's new 9768 lightRadio Metro Radio Outdoor (MRO) product based on the lightRadio cube. Visit our website to find out more about Alcatel-Lucent's lightRadiosolution.

About Etisalat

Headquartered in Abu Dhabi in the United Arab Emirates, Etisalat is one of the largest telecommunications companies in the Middle East, operating in 18 countries and serving over 140 million subscribers through mobile and fixed line voice and data services.

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From: Sam3/2/2012 9:59:22 PM
   of 176
Alcatel-Lucent: Recent Bernstein Downgrade Tells You To Buy
Brian Nichols
23 comments | March 2, 2012 | about: ALU, includes: CRM, CSCO, MS, NFLX

I think that just about everyone has some form of pet peeve, which is defined as a minor annoyance that an individual identifies as particularly annoying to him or her. Some can't stand when another person chomps their food, or when people are ungrateful, or greedy. Regardless of your pet peeve, or the degree of the annoyance, just about everyone has something that simply gets under their skin.

My pet peeve is and always has been analyst ratings. It drives me crazy, I can't stand it every time a stock reacts to an upgrade or downgrade based on the research of a so called "professional."

The reason I can't stand analyst ratings is because analysts are using the same information that we as investors use but make predictions that are so heavily weighed on the market. I have seen downgrades that cause a stock to fall 15% and upgrades where the stock rises to a similar degree. These calls are nothing more than opinions yet are weighed so heavily in the minds of investors. Some investors will argue that analysts are right much more than the average investor. However, I will argue that I could give a price target for 20 stocks and I will guarantee that at some point over the next year 15 of the stocks will surpass or fall to that particular level. I pay more attention to the downgrade or upgrade, which means that the analyst expects for the company to grow faster or slower, which is what drives the market.

I probably wouldn't care about an analyst opinion if stocks didn't react. But unfortunately that's simply not the case. There is one firm in particular, Bernstein Research, that markets itself as being recognized as Wall Street's premier sell-side firm. The firm downgraded a company on Friday that I believe to be among the most undervalued companies in the market: Alcatel-Lucent ( ALU). One of the firm's analysts, Pierre Ferragu, was quoted as saying:

After the networking equipment company generated more than 500 million euros of free cash flow in Q4, the market is no longer worrying about a potential bankruptcy filing. And indeed, the stock through yesterday's close was up 56% year to date. But he adds that going forward, investor focus is likely to shift to the company's financial performance for this year. Ferragu contends that while the company guided for operating margins in 2012 to be above 2011 levels, reaching that goal appears "challenging." He says the company "remains in a stable but challenging position today," and isn't likely to top 4% operating margins.

Luckily, ALU didn't react with a significant loss and is trading near even. But still, the stock had only pulled back after large gains and was poised to trade higher. I find Ferragu's analysis to be incorrect and further challenge how he arrived at such a conclusion. It's difficult for me to understand the $2.67 price target when the company is trading with its best fundamentals in several years. The stock fell off a cliff in 2011, when fear of a European recession spooked the market. ALU lost 75% of its value during the last six months of 2011, despite very few developments to drive the stock lower. However, it has since recovered in 2012 and is trading with a YTD gain of 53% after posting great earnings and its first year of profitability since 2006.

In a previous article I broke down the value being presented within ALU shares to better explain how cheap it's trading. This includes a P/E ratio of 7 and a price/sales of only 0.27, which is among the lowest in the market. In fact, people don't realize that the $5.4 billion company recorded approximately half the revenue of the $106 billion company Cisco ( CSCO), and trades in the same industry. Alcatel-Lucent is by far one of the cheapest stocks, according to fundamentals, in the entire market, and with its recent developments I can't validate why a so called "analyst" would give such a particularly low target.

The large YTD gains of ALU are the result of recent developments. Rather than going through each and every development I have included a short summary of the key events that have taken place and the affect that each could have on the company.

  • Telefonica ( TEF) poised to award ALU with a nationwide high-speed wireless network which shows that European are still upgrading networks to supply the demand despite a troubled economy.
  • Alcatel-Lucent is expanding its lightradio, Wi-Fi ecosystem, which will allow smart phones, tablets and other connected devices to move seamless between networks and hotspots.
  • ALU will be offering access to its worldwide portfolio of 29,000 patents through a licensing syndicate, which will create more revenue for the company and improve margins.
  • Posted 4Q earnings of $0.25 exceeding expectations of $0.07.
  • Posted its first full-year of profit in more than five years with improved margins and guidance that margins will continue to improve.
The developments above, among others, have resulted in ALU trading higher by more than 50% in 2012. The stock has pulled back by 8% over the last five trading days but is poised to trade much higher now that investors have taken profits.

To better explain, take a look at the chart below. The stock has been trading higher since January but experienced several periods where it pulled back. Its recent loss hasn't been a straight fall but rather progressive with no discouraging news to entice the loss. Even after today's downgrade the stock traded near flat. This tells me that ALU is poised to trade higher in the coming days and will continue its trend and surpass the $2.63 level that it reached on Feb 24. Therefore, I am giving a little guidance of my own, and upgrading the stock with a target price of $2.75 by March 15, as the uptrend continues and investors buy back shares.

Maybe I shouldn't care so much about analyst upgrades or downgrades. Everyone has a right to their own opinion and an analysts' call is nothing more than an opinion based on the way a firm views a company's fundamentals.

Yet when I read the summary of Bernstein's downgrade I was in utter disbelief. I simply couldn't imagine how the "premier sell-side research firm on Wall Street" could downgrade a company that is trading with a five-year loss of 80% despite trading with its best fundamentals and developments that suggest future growth. Therefore, I decided to perform a search on Bernstein, and simply typed the words "Bernstein cuts" in Google search and the following is the first found results following the downgrade of Alcatel-Lucent, along with the results following the downgrades.

  • January 18 2012 - Bernstein cuts Netflix ( NFLX) from $79 to $71. Since the downgrade NFLX is trading at $116, and has returned 22% with much better than expected earnings and a new found level of optimism.
  • January 4 2012 - Bernstein cuts, ( CRM)from $108 to $89 citing bumpy road ahead; shares fell 5% on the downgrade. Since the downgrade the stock has returned an incredible 42%, with strong earnings, and is now priced at $144.
  • February 15 - Bernstein cuts Avon ( AVP) from $21 to $20. Despite the stock trading at $18.65, below the target, it has returned a 6.5% gain following strong gains after earnings.
  • September 26 - Bernstein cuts Morgan Stanley ( MS) from $35 to $30. The stock has since returned 40% despite trading below the target price.
  • September 26 - Bernstein cuts Goldman Sachs ( GS) to $180 from $205. The stock has since returned 28% but is trading below the firm's target.
I would like to conclude by saying that I am sure Bernstein is a great firm with very educated people. My point to giving these examples, when talking about ALU, is that an analyst call shouldn't be taken too seriously. As I said, I am fairly certain that I could pick 20 stocks and give a target and that it would reach that target price at some point over the next year, and so could anyone. You have a 50/50 chance of correctly choosing the direction of a stock and if your fundamental analysis is somewhat strong then you could probably be a successful analyst. Unfortunately, investors place too much emphasis on these ratings when the reality is that these calls are almost always incorrect.

A $2.67 price target for ALU is laughable, especially if it's based on some form of fundamental analysis. I am certain that Bernstein has been correct on many occasions, but with this particular downgrade I cannot find one reasonable explanation for the target, especially when margins are improving, profits are rising, the company is profitable, and has significant developments to encourage growth. An investment decision shouldn't be determined by what any analyst expects, or on what I say, but with ALU I urge you to do your homework before listening or taking the advice of any firm, even if it's "Wall Street's premier sell-side firm."

Disclosure: I am long ALU.

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