The woes of Alcatel-Lucent S.A. (NYSE: ALU) are growing. A quarterly loss of more than $460 million if you adjust dollars for euros is one thing, but the company cannot get its growth back. Revenues were down 3% and the company is in the middle of trimming down its workforce already. After burning through much more cash the heat is on and the future is become about as uncertain as ever.

CEO Ben Verwaayen is now looking at further cost cutting measures. That includes an exit of the wireless business throughout the EMEA region. The company is also looking to strengthen its balance sheet. Perhaps the CEO should be more public about trying to monetize that massive portfolio of patents that came with Bell Labs in the Lucent buyout.

While Alcatel-Lucent has ample cash through 2013 and into 2014, there is a debt maturity in early 2015 which at some point will have to be addressed. The company can issue more debt to roll that debt forward again or it can sell assets. It was hard to not notice that the company has now burned through about $1 billion in cash so far this year. After monitoring this situation for years and years, we just cannot really see how Alcatel-Lucent is going to be able to just cut its way into prosperity.

Sales in North America were up, but the woes of Europe brought on a sales drop of 15%. Even sales in the Asia-Pacific region were down more than 1% in the latest report. Alcatel-Lucent was originally going to be a full communication solutions provider but it sure looks to be getting focused more and more on next-gen systems and in selective geographies rather than all over the globe. That puts a focus on China, Latin America, the U.S., and a few other geographies.

We are not willing to endorse management’s commitment to positive cash flows nor to margin improvements. Our only reason to doubt that disbelief is if the company can somehow convince the investment community that margin improvement is just on the non-GAAP basis AND that cash flow could somehow be counted on a non-GAAP basis as well. And on possible asset sales, we would seriously question just how much of a fair value anyone would pay this company for its assets.

The ADR trading in Alcatel-Lucent has been a disaster today, Shares are now literally a faction of a cent under the $1.00 barrier after a drop of just over 10%. The 52-week range is $0.91 to $2.66 and the company’s market cap is now down to $2.25 billion or so according to Yahoo! Finance.

JON C. OGG

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