LONDON FrancoAmerican network supplier AlcatelLucent may be struggling
with restructuring woes, mounting losses and a difficult time for the industry
in general, but on Thursday it fought back with news of a deal that could be
worth over $1 billion.
AlcatelLucent (nyse: ALU news people ) confirmed it had landed a twoyear
contract with Brazilian operator Brasil Telecom (nyse: BTM news people ),
but would not elaborate on the price of the deal.
According to press reports, AlcatelLucent trumped rivals like Nokia (nyse: NOK
news people ) and Siemens (nyse: SI news people ) networksupply
venture, to be the sole company responsible for maintaining Brasil Telecoms
network. The contract is reportedly worth nearly 2 billion Brazilian reals, or
Shares in AlcatelLucent gained 12 euro cents (18 cents), or 2.7%, to 4.64 euros
($6.81), in Paris. Worries over the companys widening losses and troubled
postmerger restructuring program have battered the stock over the past six
months, pulling it down 54.8%. (See "Any News Would Be Good News For Alcatel")
"This is not necessarily a good turnaround in fortunes, but it is a good
contract to win," said Richard Windsor, analyst with Nomura International. He
told Forbes.com that news of such deals did not usually contribute to a boost in
the share price, but Alcatels stock had been "unbelievably depressed" recently.
Swedish rival Ericsson (nasdaq: ERIC news people ) saw its main B shares
gain 0.38 Swedish kronor (6 cents), or 2.5%, to 15.60 kronor ($2.43), in
Stockholm. Although the network supplier has gained from AlcatelLucents
troubles, price competition and a downturn in sales led the former darling of
the sector to announce a shock profit warning last October. (See "Hung Up On
According to Nicolas von Stackleberg, an analyst with Oppenheim Research,
Thursdays lift to the sector was also attributable to the potential for
cuttingedge video applications for smart phones like Apples (nasdaq: AAPL
news people ) iPhone. He told Forbes.com that Steve Jobs keynote speech at
MacWorld on Tuesday talked up multimedia upgrades for the iPhone and the iPod
Touch, which may have excited some investors. (See: "Jobs Fails To Wow At
Credit Suisse analyst Kulbinder Garcha believed that the contract would add 2.2%
to annual revenue estimates for the coming year. He said that service operating
margins had remained stable so far at around 5%, unlike other segments in the
network supply industry.
Nokia Siemens Networks said earlier this month that it had won a $935 million
contract with Kuwaitbased operator Zain to roll out a mobile network in Saudi
Arabia from scratch. The contract includes five years of maintenance services.
(See "Nokia And Siemens $1 Billion Saudi Call")
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