Alcatel-Lucent S.A. (NYSE: ALU) was given some positive to mixed analyst coverage this week after the troubled communications equipment maker decided to focus on advanced communications as “The Shift Plan.” Now Standard & Poor’s is downgrading the company’s credit ratings further into junk territory. S&P announced Friday morning that the credit ratings have been downgraded to B- from B. The good news is that the cut was not worse, and S&P now has a Stable outlook for the company.

What is not covered as much but should be considered is that S&P also downgraded the existing unsecured debt instruments to a rating of CCC from CCC+ in this call. The preferred stock rating was also cut to CCC- from CCC in this call.

The move covers the shift into an industrial specialist rather than a telecom equipment generalist outfit. S&P thinks that the restructuring costs will further increase its cash burn and losses seen in 2013 and 2014. The Stable outlook is based on an expectation that operating margins gradually will improve over the next 24 months, and that the firm’s liquidity will be sufficient while it loses money in 2013 and 2014.

Alcatel-Lucent’s restructuring costs are projected to be 830 million additional euro over 2014 to 2015. S&P does acknowledge that the asset sales and the debt refinancing are likely to limit further downside risks.

The damage may have been done merely by the headlines. Alcatel-Lucent ADRs are down 1.4% at $1.91, against a 52-week trading range of $0.91 to $2.01. Trading at the local exchange in Paris is down 2.1$ at 1.46 euro, against a local 52-week range of 0.71 to 1.55.

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