At the risk of sounding like I'm looking to bash Alcatel-Lucent (NYSE:ALU), I have been thinking more about the company's recently-announced restructuring efforts and wondering if they will help the company as much as they may help the company's rivals. The “law of unintended consequences” is real, and though there are sound motives for the company's moves, it nevertheless could backfire. To that end, I have to wonder if Ericsson (Nasdaq:ERIC) and Huawei are poised to reap the most benefit from Alcatel's self-improvement plans. SEE: Will A New Alcatel-Lucent Plan Lead To Better Results?The End Of “Soup To Nuts”It wasn't so long ago when equipment vendors thought there were significant advantages in being “end to end” vendors for telecom service providers – offering pretty much all of the equipment and services needed to build, operate, and maintain wireline and wireless networks. Given the bankruptcy of Nortel and the hardships seen by the likes of Alcatel, Ericsson, Nokia Siemens Networks, I'd say that being big wasn't any particular shield against hard times in the sector.Now that philosophy seems to be unraveling at least in part. Due in part to the fact that neither Nokia (NYSE:NOK) nor Siemens (NYSE:SI) could stomach the ongoing underperformance at NSN, the company concentrated its focus on mobile broadband, and has being doing much better since. Now Alcatel is looking to go the same way with a new focus on IP networking and broadband access, while selling off other businesses.This may well be a case of “easier said then done”, though. As was pointed out in an editorial in FierceBroadbandWireless, Alcatel tried to slim down its operations back in 2006, but customers rebelled. Alcatel ultimately decided that the customer(s) is always right and abandoned those plans, arguably to its own detriment. So will Alcatel management once again find that they are putting the company's market share in areas like CDMA, mobile backhaul, and/or optical at risk by winnowing out the less promising businesses?SEE: China Unicom Stands At NeutralDown To TwoAssuming that Alcatel-Lucent does go through with the restructuring as laid out this week, Ericsson and China's Huawei will be the only two end-to-end vendors left in the market. As mentioned before, NSN streamlined a little while ago, while ZTE lacks the service elements to go with its hardware. Then there are the various other players like Juniper (Nasdaq:JNPR), Cisco (Nasdaq:CSCO), and Ciena (Nasdaq:CIEN) that compete in particular segments of the market.All told, I wonder whether this ultimately benefits Ericsson the most, at least among carriers who feel as though they still need end-to-end vendors. With all of the concerns about spying from China, the North American and Western European markets have gotten less hospitable for Huawei and ZTE lately, leaving Ericsson as the potential beneficiary.It certainly doesn't hurt that Ericcson is the global leader in wireless market share (close to 40%), with particular strength in LTE and the U.S. While Alcatel has recently made some gains in CDMA, does any of that flow back to Ericsson with this restructuring? On the other hand, Ericsson isn't involved routing and switching or optics (but Huawei is), so there may only be just so many routes for business to flow away from Alcatel and toward Ericsson. Turbulence Usually Favors The LeadersUltimately, I do believe this restructuring is going to be good news for many of Alcatel's rivals. With management focused on selling assets, cutting costs (including firing workers), and perhaps preserving existing customer relationships, this opens an opportunity for Ciena, Cisco, Juniper, and Ericsson to aggressively target Alcatel accounts in optics, routing/switching, mobile packet core, and wireless.Along those lines, if there is still any validity left in the end-to-end vendor concept, it would seem that Alcatel-Lucent's efforts to restructure and refocus could ultimately be a boost to Ericsson's recovery plans. With Alcatel going into a significant restructuring just as demand for telecom equipment seems about to recover, this could be a good time for investors to once again consider the merits of Ericsson as an investment.

Related Articles
  1. Investing News

    Latest Labor Numbers: Good News for the Market?

    Some economic numbers are indicating that the labor market is outperforming the stock market. Should investors be bullish?
  2. Investing News

    Stocks with Big Dividend Yields: 'It's a Trap!'

    Should you seek high yielding-dividend stocks in the current investment environment?
  3. Investing News

    Should You Be Betting with Buffett Right Now?

    Following Warren Buffett's stock picks has historically been a good strategy. Is considering his biggest holdings in 2016 a good idea?
  4. Products and Investments

    Cash vs. Stocks: How to Decide Which is Best

    Is it better to keep your money in cash or is a down market a good time to buy stocks at a lower cost?
  5. Investing News

    Who Does Cheap Oil Benefit? See This Stock (DG)

    Cheap oil won't benefit most companies, but this retailer might buck that trend.
  6. Investing

    How to Ballast a Portfolio with Bonds

    If January and early February performance is any guide, there’s a new normal in financial markets today: Heightened volatility.
  7. Stock Analysis

    Performance Review: Emerging Markets Equities in 2015

    Find out why emerging markets struggled in 2015 and why a half-decade long trend of poor returns is proving optimistic growth investors wrong.
  8. Investing News

    Today's Sell-off: Are We in a Margin Liquidation?

    If we're in market liquidation, is it good news or bad news? That party depends on your timeframe.
  9. Investing News

    Bank Stocks: Time to Buy or Avoid? (WFC, JPM, C)

    Bank stocks have been pounded. Is this the right time to buy or should they be avoided?
  10. Stock Analysis

    Why the Bullish Are Turning Bearish

    Banks are reducing their targets for the S&P 500 for 2016. Here's why.
RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center