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Alcatel-Lucent is a telecommunications equipment vendor, the result of a 2006 merger between Alcatel and Lucent. As one of the largest telecommunications vendors in the world, Alcatel-Lucent offers wireless, wireline, convergence, and enterprise communications equipment.[1] Based in Paris, France, the company sources revenue evenly from North America, Europe and the rest of the world.

Since the merger ALU has performed poorly, posting a $751.8 million loss in 2009 and a loss of $7.29 billion in 2008. Telecommunication equipment providers depend heavily on a small group of service companies such as Verizon Communications (VZ) and AT&T (T), which provide consumer services such a Internet access, wireless voice and data, and video. On the positive side, Alcatel-Lucent's broad offerings allow the company to sell a suite of products, services and upgrades, effectively locking in service providers for periods of time.

Alcatel-Lucent depends on continuous innovation in order to meet demands for newer, faster telecom products. While the company has 40% market share of CDMA (wireless) and DSL (Internet access) technologies, both are reaching maturity and may be displaced by newer equipment, which the company may or may not currently offer. The company has made a significant bet on third generation (3G) wireless, which allows high-speed concurrent transmission of voice and data over wireless networks. One potential threat to this technology is the emergence of WiMAX, a 4G technology that could potentially leapfrog 3G as wireless service providers migrate directly to this even faster, newer standard.

Company Overview

Alcatel-Lucent resulted from the 2006 merger of two large telecommunications equipment vendors, Alcatel and Lucent. The merger of the two competitors into the Paris-based Alcatel-Lucent led to the creation of what is now one of the world's largest vendors of telecommunications equipment.

Business and Financial Metrics

First Quarter 2010 Results

Alcatel-Lucent's earnings were driven down during the quarter because of an industry-wide component shortage that prevented it from being able to meet product delivery timelines. The company reported a quarterly profit only twice since Alcatel purchased Lucent Technologies in 2006. Its first quarter loss was $660.3 million, steeper than the $515.4 million loss it reported in the first quarter of 2009.[2] Alcatel-Lucent's revenue dropped $4.16 billion, a 9.8 percent decrease from $4.61 billion in Q1 2009.[2] Revenue declined 18 percent from Q4 2009. Alcatel-Lucent's main competitors-Ericsson (NasdaqGS: ERIC) and Nokia Siemens Networks--reported a 9 percent drop in Q1 sales.[2]

Business Segments

Enterpise, 9.4% of total Revenues

This includes including IP communication product offerings specializing in the education, finance, healthcare, and hospitality industries.[3]

Leigh,Well I do see your point. All that money the government spent on cortepums and such and Texas Instruments wound up with the profits. Terrible. Heck, they even paid me (indirectly). Back in '67 I think it was.Of course if you'd like to turn off your computer and stop using the son of Arpanet forever I will understand. Just to keep your moral purity intact.

Enterprise and Services, 9.4% and 20.3% of Revenue, Respectively

The enterprise segment of Alcatel-Lucent provides telecommunications services for businesses, from call center networking to inter-business IP networking. Enterprise business represents 9.4% of revenues.[4]

Their services sector deals with professional services like networking as well as maintenance, and is often sold in conjunction with carrier and enterprise equipment and installation. Services represent 20.3% of overall revenues.[4]

Trends and Forces

The patent ssteym has been broken for a long time.One problem stems from when a judge replaced the old understanding of what patents were for with pure rent seeking.Another (and very old) problem is correctly identifying what is and isn't patentable. Old example: barbed wire. It was a significant breakthrough when someone figured out how to manufacture the stuff, but the patent turned out to be all but useless, because it depended on the pattern of the product, not the innovation in manufacturing. Which is why there quickly developed over a hundred different styles of barbed wire soon after it was invented. The inventor would have been better off working on licensing the manufacturing technology, rather than trying to be a monopoly manufacturer.Patents are useful to society when they promote the publication of inventions so that others can leverage off of new ideas and invent even more new stuff. If an invention is so obvious that anyone in the field can look at the product and go "Ah ha! That's how they did it.", then a patent on it does society no good.

Marc, I'm from New Jersey and I DO adjust! I never thguoht of it that way before. I looked for my brother in your class picture but I didn't see him. Of course you were right I had Sycamore and Cedar streets mixed up. Oakwood and Lee are parallel and yes, that would have been the Ochs farm that we went to for corn and cucumbers. I don't know why, but my brothers and I didn't go towards Oakwood when we ventured away from Lee Road. We went the other direction except when we walked down Martin Rd. to school.I'm glad you found the Secular Jewish Circle!Oh, and I'd love to see someone performing Counting Flowers on the Wall. That's all,Polly

Service Vendor Demand for Telecom Equipment

Alcatel-Lucent's products are not sold to a general market; much of its revenue is concentrated between a small number of telecom service vendors. Because there are so few telecom service providers and equipment vendors--especially in the wireless sector--there is a high concentration of revenue between firms. This tight ecosystem may lead to volatile cycles for equipment vendors as they are at the beck and call of a few key service providers, like Verizon and AT&T.

To insulate against this effect, Alcatel-Lucent has been aggressively playing the field by making deals with many major carriers, including international ones. Examples of recent deals include:

  • A three-year agreement with Verizon to be their general supplier in all networking fields, including wireless, optical, and IP technology
  • A 25% stake in 2Wire, who recently signed a deal to provide AT&T with triple play home gateways. The gateways are designed to streamline data, voice, and media applications throughout homes, and could signal a new service focus on bringing networking to consumer residences
  • A deal with the Chinese Datang Mobile to provide China Mobile (Hong Kong) (CHL) with most of the equipment for its 3G network expansion

The fate of Alcatel-Lucent is intimately connected with the fate of the service vendors. If a carrier's market strategy shifts away from utilizing the products that Alcatel-Lucent specializes in (i.e. IP networks, optical fibers, and 3G technologies), business may drop adversely. That said, there are very few telecom technologies that are not produced by Alcatel-Lucent and its broad offerings offer potential to cross-sell a suite of products and services to customers.


Alcatel-Lucent is one of the world's largest telecom equipment vendors but competes heavily in specific sectors with Cisco Systems (CSCO), Ericsson, Nokia (NOK), Motorola (MOT), and other, smaller companies like Nortel Networks (NT).

Huawei and other Chinese vendors have put price pressure on the market. As a result, Alcatel-Lucent had to scale up and save costs, and will have to continuously save costs in the future. Huawei spends heavily on R&D, is the market leader in Asia, and is taking market share from the rest of the world.

'Alcatel-Lucent Share by Product Sector
Rank Market Share % Revenues Competitors
CDMA 1 40% 17 Nortel, Motorola, Samsung, Huawei
WCDMA 4 9% 6 Ericsson, Nokia, Huawei
GSM 3 13% 15 Ericsson, Nokia
Optical Networking 1 25% 14 Nortel, Huawei, Nokia, Fujitsu
DSL 1 40% 13 Nokia, Ericsson, Huawei
Services 3 12% 16 Ericsson, Nokia
Legacy Voice 1 >25% 7 Nortel, Ericsson, Nokia
IMS/VoIP/Edge Routing 1-3 >15% 9 Cisco, Juniper, Redbeck, Nokia


  1. Form 20-F for Fiscal Year 2008, pp 5-9
  2. 2.0 2.1 2.2 Fierce Telecom: "Component shortage put damper on Alcatel Lucent's Q1 2010 results" May 7, 2010
  3. 4.0 4.1 2008 Form 20-F, Section 6.3
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