Alcatel-Lucent's 2015 turnaround may become a reality

Alcatel-Lucent (NYSE: ALU) may be able to make good on its promise of delivering positive free cash flow for the first time since the two telecom companies merged in 2006. CEO Michel Combes said during the company's year-end and fourth-quarter earnings call that free cash flow is a goal of the company's turnaround, which he expects to happen by year-end.

The infrastructure firm, which has been aggressively slashing costs, also reported fourth-quarter sales of $4.2 billion. In addition, operating profit doubled from a year earlier to $321.54 million but fell short of expectations.

Combes noted strong growth in the company's IP-routing business, which now claims a market share of 26 percent just behind Cisco. He also predicted more growth in that area due to strong demand for data.

Over the past year, Combes has directed more R&D toward the company's routing business, particularly as a way to distance itself from competitors such as Ericsson and Nokia and put it more directly into competition with Cisco.

Alcatel-Lucent is also looking to diversify its customer base by selling more of its portfolio of edge and core routers to large enterprises and content providers.

The company also noted a slowdown in spending by big telecom firms such as AT&T (NYSE: T) and Verizon (NYSE: VZ), which was due to the companies both largely completing their 4G LTE buildouts.

Alcatel-Lucent also noted that it will be upgrading its marine-cable system in the Atlantic for the first time since 2006. The company is planning an IPO of that segment in the second half of the year. Analysts have valued it at $679.1 million.

For more:
- see this Bloomberg article
- see this WSJ report (sub. req.)
- see this Reuters report
- see this press release

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