Alcatel-Lucent has set positive turnaround signs, says Deutsche Bank

Alcatel-Lucent's (NYSE: ALU) share price rose 13 cents, or 10 percent, to $1.41 yesterday after Deutsche Bank analyst Kai Korschelt upped his rating on the company's shares from "buy" to "hold," arguing that the Franco-American company has put the right elements in place to get its ship on course.  

He said that the company "has the key ingredients for a potentially successful turnaround: A new CEO with a solid cost-cutting track record, a likely positive revenue and margin inflection in 2013/14, and a termed out maturity profile."

The vendor has set what Korschelt says are "ambitious" targets of €15 billion ($19.5 billion) and gross margin of 35-37 percent by 2015.

He believes that Alcatel-Lucent's choice to hire former Vodafone Europe CEO Michael Combes as chief executive officer will be a key element to meet its goals. Combes took over the reins from Ben Verwaayen beginning on Monday.

One of the key strengths that Combes has is cost cutting. During his tenure at Vodafone and earlier at France Telecom, Combes conducted two major cost-cutting programs.

"With ALU having already realized more than 50% of its 1.25bn cost savings plan combined with Mr. Combes' solid track record at executing/overseeing cost-cutting, the appointment makes us incrementally more confident that ALU is on track to improve margins/profitability in his tenure," Korschelt said.

For more:
- Barron's has this article

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