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Telecoms equipment maker Alcatel Lucent SA (ALU.FR) Wednesday said it was exploring options for its enterprise business unit, including a possible sale to a third party.
The announcement follows months of speculation over the fate of the business unit which could be worth at least $1.5 billion, according to people familiar with the matter.
The Wall Street Journal in mid-April reported that the company was exploring a sale of its enterprise business and had hired advisers.
In a statement made in a filing to the French market regulator, the Franco-American equipment maker said that no decisions had been made over the unit which sells switches and telephone to clients including call centers.
"There is no certainty that this review will result in any change to the Alcatel-Lucent Enterprise business," the company said in the statement.
Besides office telephones, Alcatel-Lucent's enterprise business also sells switches and other gear. It also sells hardware and software used in call centers. While profitable, it accounts for less than 10% of the company's annual revenue, and doesn't fit with its main operation of selling network gear to telecom carriers.
Selling the operation would provide cash that Alcatel Lucent could invest in its other operations just as its fortunes appear to be turning. Alcatel Lucent has bet that booming demand for data hungry smart phones will force telecommunications operators to revamp their networks. Alcatel-Lucent's share price rose rallied sharply in the beginning of the year as demand for gear increased in the U.S resulting in improved revenues. However, analysts have since questioned whether the company is too reliant on the U.S for revenue growth. Competition from Asian telecoms equipment makers, such as ZTE Corp. could also dampen growth prospects, analysts say.
Alcatel Lucent has struggled since the landmark combination in 2006 of Alcatel, the French telecom-gear maker, and Lucent, its American counterpart which was once part of the old American Telephone & Telegraph monopoly. The merged company has lost money every year, and by 2008 its market capitalization had shriveled to about $6 billion, from a pre-merger level of $36 billion. Its current market value is about $14 billion. Lucent spun off its enterprise division as Avaya, in 2000.
Alcatel Lucent Chief Executive Ben Verwaayen expects the company to be "normal" by the end of 2011, posting regular profits and positive free cash flow.
At 1414 GMT Wednesday, Alcatel Lucent's shares were trading up 0.5% at EUR3.64, with the benchmark CAC 40 around 1% higher.
-By Max Colchester, Wall Street Journal ; +33 1 4017 1828 ; email@example.com