Alcatel-Lucent Shares Dropped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of embattled telecom equipment supplier Alcatel-Lucent (NYS: ALU) plunged 18% on Friday after its quarterly results and guidance disappointed Wall Street.

So what: Alcatel-Lucent's third-quarter sales didn't miss by a whole lot (3.8 billion euros versus the consensus of 4 billion euros), but plans for even more restructuring suggest that the company is suffering from much more serious structural problems than previously thought. In fact, the shares are busting through their 52-week low on today's news and are down a staggering 65% over the past six months alone.

Now what: Don't expect a results-driven turnaround any time soon. Given all the uncertainties and selective customer spending, particularly in Europe, CEO Ben Verwaayen warned of "weaker revenues than initially planned in the fourth quarter of 2011" and said that a forecast for 2012 would be impossible. So if you have to play in the space, competitors like Cisco (NAS: CSCO) and LM Ericcson (NAS: ERIC) are probably safer ways to go.

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At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of Cisco. The Fool owns shares of and has created a bull call spread position on Cisco. Motley Fool newsletter services have recommended buying shares of Cisco Systems. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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