When you do the limbo, the lower you can go, the better. However, stock markets tend to work the other way around.
French-American telecommunication company Alcatel-Lucent (NYSE:ALU) continues to attract attention but it’s not because it’s looking pretty. Yesterday Standard & Poor analysts notched the outlook on ALU down to negative from its previous stable spot. S&P also reaffirmed the B grade for the company’s corporate credit ratings, both short and long-term.
S&P outline expected weak results from operations and and large cash flow losses over 2012. The overly cautious spending in the sector and the ferocity of the competition will probably be the biggest factors to continue hindering Alcatel. The current negative outlook means ALU can go down one more notch over the next twelve months.
Alcatel announced Q2 results on Jul 26 and the numbers there are not pretty:
- reported net loss of EUR245 million
- quarterly revenue down 7.1% on a year-over-year basis
Wall Street projections for Q3 earnings shrunk from the $0.04 of July 24 to today’s $0.02. At least Alcatel seem to have dodged the target guidance of $0 some analysts set for them when the stock dipped to $1. In a desperate attempt to pull itself out of the swamp by its own hair, Alcatel is cutting 5000 job positions and is planning a total of EUR1.25 billion of expense cuts by the end of 2013. In an earnings call CEO Ben Verwaayen admitted that the company needs to look at “the structure of its choices”.
Still, there are some expectations for improvement in market demand over the remaining half of 2012. If the company manages to prevent a cash flow bleed-out during the coming months, it may find itself back on its feet again.
