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Alcatel-Lucent Turnaround May Be Taking Hold

Rising stock prices and possibly rejoining a blue-chip index in France are good news for the embattled company.

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Telecommunications equipment maker Alcatel-Lucent, which seems to have been in perpetual reorganization since its creation in 2006, may be seeing its turnaround efforts finally gaining traction.

The company, created seven years ago via the merger of Alcatel and Lucent Technologies to challenge such networking giants as Cisco Systems and Ericsson, has seen its stock price rise recently and may be rejoining France's blue-chip CAC 40 index this month, according to a report in Reuters. It would be a significant move for the company—Alcatel was one of the index's founders about 25 years ago, and Alcatel-Lucent was taken off the CAC 40 last year as its business troubles continued.

According to Reuters, Alcatel-Lucent would replace STMicroelectronics, which has seen a sharp downturn in the value of its stock.

The new comes less than two months after CEO Michael Combes released some of the details of the company's Shift Plan restructuring initiative, which includes cutting another 10,000 jobs as part of a larger effort to save as much as $1.36 billion in costs by the end of 2015. The job losses fueled worker protests in Europe, but Combes countered that without substantial cost cutting, Alcatel-Lucent would not survive.

Other parts of the Shift Plan include shifting the company's focus away from being a more general telecommunications equipment vendor to focusing on such high-growth areas as IP networking and ultra-broadband access. In addition, the company, which has about 72,000 employees, will cut administrative, sale and support function, and will reduce R&D spending legacy technologies.

Combes said the Shift Plan is the company's sixth restructuring effort since its creation. Alcatel-Lucent has been struggling against not only competitors like Ericsson, but also Chinese vendors like Huawei Technologies.

According to Jeff Kagan, an analyst who covers the telecommunications industry, rejoining the CAC 40 index would be a significant step for Alcatel-Lucent.

"Alcatel-Lucent has been crashing and burning for many years," Kagan said in a statement released Dec. 1. "However during the last year or two we may be seeing the beginnings of a turnaround. … We have seen companies rise and fall over time. Alcatel-Lucent has been falling over recent years. Nothing they did seemed to work. Lately however we are seeing signs of recovery. While it is still too early to say whether Alcatel-Lucent is on a strong and lengthy recovery, it is now on the radar."