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Brazil deal may bring $1 billion to AlcatelLucent

Date: 1/21/2008 5:44:23 PM

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 $1.1 billion.

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 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 Ericsson")

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 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 MacWorld")

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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