Will Goldman Sachs Group Inc. (NYSE:GS) comes to the rescue of Alcatel-Lucent (ALU) – RPX, GOOG

To strengthen its balance sheet Alcatel-Lucent (ALU) is collaborating a finance deal with investment bank Goldman Sachs Group, Inc. (NYSE: GS). According to internal sources negotiation are now underway between the two companies regarding the terms of the loan agreement which could be backed by the company’s rich patent portfolio. The market value of Alcatel-Lucent (ALU) rose to a $2.16 Euros (equivalent to $2.8 billion) as its stocks gained almost 16% yesterday when the news spread. This has been the highest advance since February 2012. Prior to close at $93 Euro cents a share yesterday the company’s stocks took a dip by 34% as its trading volume hovered near the 23 year low on Paris market.

The Network equipment manufacturer came into existence at the merger of Alcatel SA and Lucent technologies and has been recorded almost $700 million cash spendings per year since then. Liquidity problems and recurring losses since demand rigorous efforts to leverage its financial position.

Ben Verwaayen, CEO has tried to improve the situation of the company in persistent liquidity crunch through disposal of assets many a time in the past. The CEO who has reigned the office for last six years now, was the mastermind behind the $1.5 billion sales deal with Permira Advisers LLP. Alcatel-Lucent sold it’s call centre software manufacturing division in that deal. Ben also approved the disposal of the company’s holding in aerospace manufacturer Thales SA (HO) in 2009 to make more liquid funds.
The recent trends of declining demand in the network equipment industry and increased competition from Chinese market has put a cap on expansion of the French Networking Giant.

Stock prices have not shown any positive response since long in the midst of this vicious circle and the CEO is forced to consider multiple financing options to bridge the gap this time. London based financial information firm Markit, rates the company at the 9th rank in the list of most short sold European stocks. Markit based its rating on the percentage of borrowed stocks to total trades shares. This is a typical indicator of trader’s inclination to short sell the underlying stock.
Reportedly he is thinking of possible solutions ranging between asset backed financing, sale of assets (divisions) and use patent portfolio.The company inherited a rich patent portfolio from Bell Labs at its inception which these can be used to back financing from the banking sector.

Patent portfolios have emerged as a key factor in the financial decisions of technology companies . The trend gained hype after the patent lawsuit between Samsung inc. and Apple Inc. (NASDAQ: AAPL). The same trend had caused Google Inc. (NASDAQ: GOOG), to acquire the patent portfolio of Motorolla mobility for $12.5 billion last year.

Alcatel-Lucent (ALU) which has yet to announce any financial gains it made on the highly publicized deal with RPX Corporation (NASDAQ: RPXC) involving 29,000 patents and has hired a Nokia executive Craige Thompson to handle the patent portfolio.
Shares of Goldman Sachs Group, Inc. (NYSE: GS) have declined by a 0.33% to $117.7 while the RPX Corporation (NASDAQ: RPXC) stocks declined by 0.22% to close $8.97, and shares of Google Inc. (NASDAQ: GOOG) were down by 0.61% to close at $665.87.

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Published by Steve Hackney

Steve Hackney is a corporate finance professional with over 14 years of experience in cash management and investing. He earned a Bachelor of Science in Finance from Florida State University and holds a Certified Treasury Professional certification. Steve lives in Orlando, Florida with his family.