The Freeland File
Aerospace & Defense
Global Market Data
Lucy P. Marcus
The Great Debate
Macro & Markets
Lipper Awards 2012
Personal Finance Video
IRS finalizes new tax for medical devices in healthcare law
05 Dec 2012
Apple's shares swallow biggest loss in four years
05 Dec 2012
Military halts clashes as political crisis grips Egypt
Therapist declined temporary confinement for accused Colorado gunman: report
Guatemala detains McAfee, to expel him to Belize
Egyptian protesters breach presidential palace cordon
IRS aims to clarify investment income tax under healthcare law
Obama’s opening ”fiscal cliff” bid seeks debt limit hike, stimulus
Our day's top images, in-depth photo essays and offbeat slices of life. See the best of Reuters photography. See more | Photo caption
Fishing for shark fin
The Ocean Sunset hunts sharks as well as other fish for their meat and fins off the cost of Canada. Slideshow
Princess Kate, Duchess of Cambridge, leaves the hospital. Slideshow
Alcatel-Lucent out, Gemalto in French blue-chip index
France to answer ratings downgrade with reforms
Tue, Nov 20 2012
AT&T to boost annual spending 16 percent to $22 billion
Wed, Nov 7 2012
Analysis & Opinion
Europe’s naked short selling ban leaves investors with skin in the game
Low valuations donâ€™t make China stocks a bargain
By Blaise Robinson and Alexandre Boksenbaum-Granier
Thu Dec 6, 2012 3:15pm EST
PARIS (Reuters) - Telecommunications equipment maker Alcatel-Lucent will be dropped from France's blue chip CAC 40 index, in a setback for a once high-profile French technology group.
Alcatel-Lucent, stuck in a downsizing spiral as it struggles with stiff competition from low-cost Chinese rivals and weak demand from customers, will be replaced in the index by smart card maker Gemalto, market operator NYSE Euronext said on Thursday.
The changes will take effect on December 24.
Alcatel was a founding member of the CAC 40 when the benchmark was created a quarter century ago. The demotion from the index means the company will be dropped from the radar screens of exchange-traded funds (ETFs) and index trackers, translating into a fall in liquidity of the stock.
Shares of Alcatel have plummeted more than 80 percent since May 2010, with the company's market capitalization shrinking to 2 billion euros ($2.6 billion) - 83rd among France's biggest listed companies.
The stock, worth as much as 97 euros during the tech bubble in 2000, sank to a record low of 71 euro cents in October. It closed at 88 euro cents on Thursday.
"At the time of the merger between Alcatel and Lucent, the group was worth 26 billion euros," said Max Kamir, a trader at Louis Capital Markets.
"I'm very negative on the stock. The company burns a lot of cash. They can have all the restructuring programs they want; without a rise in revenue, the company can't get out of trouble, even with loans and guaranties from the government."
According to index analysts, the estimated selling pressure on Alcatel's stock resulting from the exit from the index would be around 61 million euros, or 69 million shares.
The two official criteria for index inclusion are free-float adjusted market capitalization and a stock's trading volume. But unlike for Germany's DAX, the UK's FTSE 100 and Europe's STOXX 600, there are no specified thresholds for the two criteria, giving leeway to the committee.
Despite trimming its product portfolio and cutting costs, Alcatel-Lucent continues to post quarterly losses and has struggled to build up operating margins amid a brutal competitive landscape.
The group burned through 1 billion euros in the first nine months of the year, prompting management to say it was working on ways to strengthen its balance sheet, including asset sales.
Over the past few months, Alcatel has been one of the favorite European targets for short sellers, who profit from falling stock prices by borrowing shares from long-term institutional investors, selling them on the market, and then buying them back at a lower price.
Alcatel has 12 percent of its shares out on loan, according to Markit data, making it the most shorted stock in the CAC 40 by far, and one of the most shorted stocks across Europe.
A spokeswoman for Alcatel-Lucent said in a statement that the development did not affect the group's listing on the Paris and New York stock exchanges, adding that efforts to cut costs and "install sustainable profitability" would continue.
Meanwhile, the entry of Gemalto to the CAC 40 is likely to raise the profile of the tech group, which posted 2 billion euros in revenue last year from sales of secure chips and software for biometric passports, mobile phones and credit cards.
Gemalto has diversified into the security business in recent years, with a focus on payment technologies and identity management, away from its once core activity of making SIM cards for mobiles, seen under threat from Chinese chipmakers.
With more than 10,000 staff, Gemalto competes against Germany's Giesecke & Devrient in its secure travel documents and mobile payment business as well as companies such as Oberthur Technologies, WatchData and the Morpho unit of Safran <SAF.PA.
Its shares are up 92 percent this year and closed at 74 euros on Thursday.
Kamir said the replacement of Alcatel with Gemalto made sense given that they were both technology stocks. "Gemalto is present in a promising sector and has a leadership position in several areas, unlike Alcatel," said the trader.
(Reporting by Blaise Robinson and Alexandre Boksenbaum-Granier; Editing by Leila Abboud and Steve Orlofsky)
Related Quotes and News
We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Be the first to comment on reuters.com.
Add yours using the box above.
Back to top
New York Legal
Support & Contact
Connect with Reuters
Our Flagship financial information platform incorporating Reuters Insider
An ultra-low latency infrastructure for electronic trading and data distribution
A connected approach to governance, risk and compliance
Our next generation legal research platform
Our global tax workstation
About Thomson Reuters
Thomson Reuters is the world's largest international multimedia news agency, providing investing news, world news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms. Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests.
NYSE and AMEX quotes delayed by at least 20 minutes. Nasdaq delayed by at least 15 minutes. For a complete list of exchanges and delays, please click here.