Turnaround companies are always tricky. When a company is far gone enough I always see it as needing one significant development that sets it right. A lot of small victories is okay. To turn a company into a stock that the market really wants takes something that grabs headlines. News of one product breaking records does better than 10 products doing above average even if the overall effect is the same. People understand and get excited about a jackpot, because it is how we are wired. All the companies are priced pretty well for an entry with a long-term outlook, but they are potential turnarounds.
My favorite product of the line is Alcatel-Lucent's lightRadio. The company has other exciting things, but to break the almost decade of shareholder disappointments it will take something more. The routers have a similar potential, but I do not see them as innovative as lightRadio.
LightRadio is a cell tower in a cube, and is in the category of small cells. Small cells are designed to fill coverage gaps, but there are other uses. I think dense cities will require more deployment of small cells to get the data off the air and into the wired network. Spectrum is expensive and limited. The addition of Wi-Fi into the cells also supports this. Establishing Wi-Fi hotspots that recognize the carrier on the phone and allow access is probably the next most important step when it comes to providing mobile service. The technology is not going to keep pace with the data hungry populace. These Wi-Fi systems allow metering by carriers, which allows them to track data use and possibly charge for it. Being able to track and charge for data usage on Wi-Fi is probably the biggest impediment to adoption. The allotment of data can be larger and cheaper per unit, but some sort of charge must exist.
LightRadio was being rolled out across Barcelona. ALU has an agreement with Telefonica for trials. I have not seen much about the status of that. We should get more updates at the next Mobile World Congress. For now, ALU has a restructuring to carry out. The Goldman credit facility will help to keep the company afloat while it makes the cuts it needs. Some of the company's products need to start finding dominance in the market if it is going to dig itself out of its hole. At least the big liquidity concern is pushed back.
2. High-Density Servers
The debut of this product has not really occurred yet. AMD announced that it will be developing a high-density server using ARM-based chips. This is one of the few developments I like from the company. Most of the other stuff is just so much noise to me. The company is beaten by a rival in every market it is in. It differs in how much it is beaten, but nevertheless beaten is beaten.
A piece of the server market would really help AMD. It has its line of traditional servers but I prefer the high-density servers as providing more potential. The reason is that the company would not be against entrenched companies, and it can grow its business with the market for the high-density servers. The real gamble is whether high-density servers is the revolution some claim it will be, and whether it is betting on the right horse going with ARM. The servers are extremely powerful for less space and power by using a cluster of complete systems on chips. They could replace traditional servers in mega-data centers that need extreme capacity with efficiency in space and power, because real estate and electricity are not cheap. Less power also means less heat.
AMD is carrying out its restructuring plans, but the effect of these will not be clear until the second half of 2013. The company did not secure a credit facility like ALU, but it does have some protection from an institutional investor. I wonder if the company will require more capital to complete the restructuring process. That remains to be seen.
3. New Mobile OS and Phone
It was debating whether to talk about HP or Research in Motion . I was not really interested intellectually by a product of RIMM's. A mobile OS and a phone are hardly groundbreaking. However, I could not find an HP product that I even found blandly interesting. So instead I focus on BlackBerry 10 and some new phone that I have only seen leaked pictures of.