We are downgrading our recommendation on Alcatel-Lucent (ALU) from Neutral to Underperform. There was a double-digit revenue decline in the Networks segment during the most recent quarter, partly due to a shortage of components.
Revenues from Terrestrial Optics declined in the high teens. Revenues for the Wireless division declined 10.5% from the year-ago quarter. Network and System Integration revenue declined slightly in the quarter and was affected by the activity in network design, integration and optimization.
Our long-term Underperform recommendation on the stock indicates that it will track below the broader U.S. equity market over the next six to twelve months. Our target price is $2.50 or 10.42X 2011 EPS, which is well within the historical range.Zacks Investment Research
