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Alcatel (ALU) Looks to Challenge Cisco (CSCO), Juniper (JNPR) in Routers; Analysts Comment

May 23, 2012 9:14 AM EDT
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Alcatel Lucent SA (NYSE: ALU) shares are indicated for a higher open Wednesday following some positive comments on news the company would be entering the Internet core routers market. The move is to challenge leaders Juniper (Nasdaq: JNPR) and Cisco (Nasdaq: CSCO) in the segment.

UBS said the move has incremental positives in shipments timeline and the Verizon (NYSE: VZ) Metro customer win. The firm maintained its Neutral rating, however, due to revenue and margin pressure on its other legacy markets.

Deutsche Bank said Alcatel could capture up to 5 to 10 percent of the U.S. core routing market via leveraging existing IP mobile carrier relationships. In this case, Deutsche believes every 5 percent market share gain translates to about $200 million in top-line growth.

Alcatel's core router offers "meaningful improvements" over competitors, Kepler commented. The move will be highly positive, though near-term visibility remains restricted.

One RBC Capital analyst said the offering will help Alcatel improve its margins from current levels around 30 percent as new deals are struck.

Goldman Sachs thinks Juniper may be in for a little turbulence moving forward.

Shares of Alcatel are indicated about 6 percent higher. To read the release, click here.


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