ALU Acquires OpenPlug - Analyst Blog

OpenPlug, a software developer specializing in tools for mobile applications, has been acquired by Alcatel-Lucent (ALU). The acquisition strengthens Alcatel-Lucent’s portfolio of software development tools, increases the usage of OpenPlug’s mobile applications on different operating systems and boosts its availability in additional service provider stores. The companies did not disclose the term of the transaction.

With this acquisition, Alcatel-Lucent will build a podium for application developers, where they can write an application, which can be translated to operate on any of the five most important mobile operating systems. OpenPlug’s functionality will be made available to an increased number of service providers, enterprises and developers. This will extend the applications, which were only being used by devices such as smartphone, to users of any mobile. This, in turn, will expand Alcatel-Lucent’s activity in the emerging markets, where there is an extended usage of low cost mobile phones.

Alcatel-Lucent is focused on expanding its application ecosystem by making two acquisitions in the past three months. The first one was of ProgrammableWeb, a well-known repository for Web APIs (application programming interfaces), which was made in June, 2010.

Telecommunications companies continue to be the largest group in terms of mergers and acquisitions, which has helped Alcatel-Lucent’s penetration as companies try and consolidate with a single vendor. There has been a trend of consolidating with one or two providers from the telecom industry to cut costs and simplify the purchasing process, and this has caused several mergers in this industry. The creation of a clear #2 behind LM Ericsson Telephone Co. (ERIC) in the market should help boost the competitiveness of the industry and give Alcatel-Lucent solid positioning to improve its position over the long term. Besides Ericsson, another competitor of the company is Cisco Systems Inc. (CSCO).

We are encouraged by the continued progress in cost management highlighted by the year-over-year increase of 300 basis points in gross margin in 2Q10 and continued decrease in operating expenses. This is expected to continue throughout the year. With strengthening demand in some segments and geographical areas, we anticipate a strong sequential recovery in top line and operating income levels.

Based in Paris, Alcatel-Lucent is a diversified global manufacturer of telecom equipment with over 78,000 employees in 130 countries worldwide. We continue to maintain a Neutral rating on Alcatel-Lucent, with a Zacks #3 Rank (Hold recommendation) over the next one-to-three months.